After its earnings forecast for FY18 beat market expectations, shares of consumer and industrial products firm 3M (MMM 253.71, +6.02 +2.43%) trade at all-time highs. The company also beat expectations in its Q4 report, increased its dividend payment, and affirmed its FCF and organic sales growth targets for the year.
For those who may not know the name, some familiar products of 3M’s include Avagard, Bondo, Nexcare, Post-it Note, Scotch Tape and Thinsulate. 3M has built itself into one of the bigger Dow Jones and S&P 500 components under such brands, and for the better part of the most recent fiscal year, enjoyed revenue growth and earnings beats and as such, since the beginning of last year the stock has enjoyed gains north of 39% vs the S&P’s approximate 26% gain during that period.
Since the market seems to have been impressed most by 3M’s guidance, let’s begin there. For FY18, 3M upped earnings projections to $10.20-10.70 from the prior $9.60-10.00 on a tax rate of 20-22% versus the prior expectation of 26-27%. The remainder of the guidance is unchanged yet may be worth highlighting: 3M sees organic local-currency sales growth of 3-5% and free cash flow conversion of about 90-100%.
3M’s Q4 was no slouch, as earnings of $2.10 per share and revenue growth of 9.0% to about $7.99 billion beat Street expectations.
Growth emanated from a number of areas at 3M this period; namely, the company’s second largest segment, Safety and Graphics, saw 15% growth in U.S. Dollars to $1.5 billion. The segment posted organic local-currency growth of 10.7%.
In 3M’s largest business segment, Industrials, sales were up about 6.9% to $2.7 billion in U.S. Dollars as organic local-currency sales were up 3.9% led by Asia Pacific, EMEA and Latin America/Canada.
Wrapping up the last few business segments, Health Care saw revenues growth of 6.0% to $1.5 billion, Electronics and Energy sales were up 12.5% to $1.3 billion and Consumer sales grew 7.3% in Q4 to $1.2 billion.
Strictly on a geographic basis, 3M’s total sales were strongest in EMEA (Europe, Middle East and Africa) with growth of 17.1%, followed by 14.4% growth in Asia Pacific, 4.0% in Latin America/Canada, and 3.0% in the U.S. Organic local-currency sales increased 11.9% in Asia Pacific, 6.8% in EMEA, 2.8% in the U.S., and 2.5% in Latin America/Canada.
Lastly, 3M also raised its quarterly dividend to $1.36 from $1.175 per share.
In all, 3M’s impressive beat and raise keeps the stock’s strong run going into the spring of 2018. Shares also help push the Dow higher today, as the broader market gains across the board following yesterday’s volatile session which saw the Dow make an all-time high at the close but the S&P and Nasdaq drop 0.1% and 0.6%, respectively.