3M Company MMM reported first-quarter 2015 net income of $1,199 million or $1.85 per share compared with $1,207 million or $1.79 in the year-earlier quarter. The reported earnings per share missed the Zacks Consensus Estimate of $1.92. The decrease in earnings was driven by lower revenues and stronger U.S. dollar.
Net sales during the quarter were $7,578 million, down 3.2% year over year and below the Zacks Consensus Estimate of $7,820 million. The year-over-year decrease in sales was driven by an unfavorable foreign currency impact of 6.5% year over year, partially offset by organic local-currency sales growth.
Operating income stood at $1,730 million in the reported quarter versus $1,716 million in the year-ago-quarter. Operating margin stood at 22.8% in the reported quarter, up 0.9% year over year.
Segment Results
Industrial segment sales decreased 4.3% year over year in local currency to $2.7 billion in the reported quarter driven by unfavorable foreign currency impact. Organic local-currency sales increased 2.7% year over year due to strong sales in aerospace and commercial transportation, industrial adhesives and tapes and automotive market.
Health Care segment sales decreased 3.3% in local currency to $1.3 billion in the reported quarter, driven by unfavorable foreign currency impact. Organic local-currency sales increased 3.0% year over year with growth in health information systems, food safety, infection prevention and chronic care.
Consumer segment revenues were $1.0 billion in the reported quarter, down 2.9% year over year in local currency, driven by unfavorable foreign currency impact. Organic local-currency sales growth of 2.1% was driven by home care businesses.
Safety and Graphics segment sales decreased 3.6% year over year in local currency to $1.4 billion, driven by unfavorable foreign currency impact. Organic local-currency sales growth of 4.1% benefited from personal safety and commercial solutions businesses.
Electronics and Energy segment revenues were $1.3 billion in the reported quarter, up 0.8% in local currency. Organic local-currency sales increased 5.8%, driven by strong growth in display materials and systems and electronics materials solutions.
Balance Sheet and Cash Flow
Cash and cash equivalents as of Mar 31, 2015 were $1,791 million compared with $1,954 million as of Mar 31, 2014. Long-term debt stood at $6,459 million as of Mar 31, 2015 compared with $4,401 million as of Mar, 31 2014. Free cash flow as of Mar 31, 2015 stood at $789 million versus $799 million in the prior-year period.
During the quarter, 3M paid $652 million in cash dividends to shareholders and repurchased $886 billion of its shares. For first quarter 2015, 3M converted 66% of net income to free cash flow. The company also announced first quarter 2015 dividend per share increase by 20%.
In February, 3M announced its intention to acquire Polypore’s Separations Media business for $1.0 billion, which is likely to enhance its existing filtration platform.
Shares prices decreased in pre-market trading with a flat outlook and woeful earnings miss.
Outlook
3M updated its 2015 guidance. The company expects earnings to be in the range of $7.80 to $8.10 per share from the prior range of $8.00 to $8.30 per share. Foreign currency translation is expected to reduce 2015 sales by 6% to 7% in comparison to the prior expectation of reduction of 4% to 5%.
3M maintained its expectation for organic local-currency sales growth in the range of 3% to 6%. The company also affirmed its expectation of free cash flow conversion in the range of 90% to 100%.
For 2015, 3M expects foreign currency impacts to continue reducing earnings by 35 cents to 40 cents per share versus a prior expectation of a decline of 20 cents.
3M currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now include Compass Diversified Holdings CODI, Carlisle Companies Inc. CSL and Icahn Enterprises, L.P IEP, all having a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment