3M Company (MMM) is slated to release its third-quarter 2011 results on Tuesday, October 25, 2011. The current Zacks Consensus Estimate for third-quarter earnings per share (EPS) is $1.61, representing an annualized growth of 4.90%.
3M’s earnings were in line with the Zacks Consensus Estimate in the last quarter while had outperformed over the previous trailing three quarters with an average positive surprise of 2.76%.
Second Quarter Highlights
3M Company reported second-quarter 2011 earnings per share from continuing operations of $1.60, in line with the Zacks Consensus Estimate. Earnings per share increased by 3.9% year over year.
Total revenue in the quarter increased by 14.1% year over year to $7.7 billion. In March 2011, the earthquake in Japan negative affected sales growth by 2.4 percentage points. The company’s sales increased in all regions, with 24.1% growth in Europe, 20.2% in Latin America/Canada, 11.0% in Asia Pacific and 8.7% in the US.
Agreement of Estimate Revisions
In the last 30 days, out of the analysts providing estimates for the stock, three decreased their estimates for the third quarter while one increased its estimate. For 2011, three decreased their estimate and one increased the same while for 2012, five decreased their estimates. None of the analysts have increased their estimate for 2012.
For the third quarter and for 2011, one of the analysts increased its estimate in the last 7 days while one has increased for 2012.
Magnitude of Estimate Revisions
In last 30 days, the earnings estimate for 2011 decreased from $6.21 to $6.19 and for 2012 decreased from $6.78 to $6.65. The estimate for the third quarter remained unchanged at $1.61 in the last 30 days.
In the last 7 days, the earnings estimate for 2011 increased from $6.18 to $6.19 and for 2012 remained unchanged. The estimate for the third quarter increased from $1.60 to $1.61 per share in the last 7 days.
Our Take
The company generated significant free cash flow in second-quarter 2011. A strong cash flow position and continuously expanding sales revenue provide 3M ample resources to expand through acquisition and innovation of new products. 3M is globally recognized for its innovations, supported by some of its well-known brands, such as Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard leading the market. We believe that continued capital expenditure with new product launches should bolster its prospects across most end markets.
However, the company’s growth objectives are largely dependent on timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new offerings and bring those to the market at acceptable price points.
Further, the results have been impacted by worldwide economic and capital market conditions. Negative consumer sentiment is affecting the retail store traffic. On the corporate side, lower employment levels are negatively reducing office supply purchases in most companies.
Overall, we believe Honeywell is all set to deliver good financial results in the third quarter of 2011. We continue to maintain a Neutral rating on 3M Company for the long term. The company, however, has a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
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