The US Is Back, 3M Says

MINNEAPOLIS (Minneapolis Star Tribune/MCT) -

3M Co. posted record third-quarter earnings Thursday, with positive input from all businesses, especially in the United States.

But the strength at home comes with some cost. 3M executives narrowed their earnings guidance for the rest of the year due to the detrimental effect that a stronger U.S. dollar has on international sales.

The Maplewood, Minn.-based maker of Post-it notes, Scotch tape and industrial abrasives said its profit grew 5.9 percent to $1.3 billion, or $1.98 a share, which beat analysts’ average expectations by a penny. Sales grew 2.8 percent to $8.14 billion.

“This was another strong quarter for 3M,” CEO Inge Thulin told analysts during a conference call Thursday morning. “3M remains on track to deliver its long-term financial objectives.”

3M’s health-care business delivered the largest sales gains of the quarter, as demand shot up for 3M’s transdermal patches, other drug-delivery products and digitized medical-record systems. Health-care sales rose 4.7 percent during the quarter, to $1.4 billion, amid strong sales in Asia and developing countries.

3M’s largest division, industrial products, saw sales rise 3 percent, to $2.8 billion for the quarter, amid solid demand from aerospace, transportation, filtration and automotive customers. The unit saw “especially encouraging growth in the United States,” Thulin said. “The U.S. economy has improved, and we are able to capitalize on that.”

CFO Nicholas Gangestad said U.S. industrial sales jumped 8 percent during the quarter. “The U.S. was by far the fastest-growing region in the world,” he said.

Analysts noted that it’s a significant change from the 2008 recession and years of slow recovery. “U.S. was really strong. You are actually seeing acceleration,” said Ajay Kejriwal with FBR Capital Markets. 3M “had a really good quarter.”

Another positive change landed in 3M’s formerly problematic and revamped electronics and energy business. It recorded a 3.5 percent gain, to $1.5 billion, amid growth in screen display materials and systems. The growth in electronics offset a 2 percent dip in energy-related products.

3M’s safety and graphics business had sales rise 1.3 percent to $1.4 billion. Its consumer business rose 2 percent to $1.2 billion due to consumer health-care and home-care products and stationery sales.

For the full year, 3M now expects earnings in the range of $7.40 to $7.50 a share, a narrowing from prior guidance of $7.30 to $7.55 per share. “3M estimates foreign currency impacts will reduce sales by approximately 1.5 percent for the year versus a previous estimate of approximately 1 percent,” the company said.

JP Morgan Chase analyst Steve Tusa told Thulin during the call, “Clearly, there was some very good execution (in the quarter) against the foreign exchange and global environments out there. The margin was definitely stronger than what we were expecting.”

On Thursday, 3M stock rose $6.10, or 4.4 percent, to $145.05.