3M Co. (MMM) released its earnings results for third quarter of 2010, reporting earnings per share of $1.53, beating the Zacks Consensus Estimate of $1.51. With a 13% increase in its earnings, the company’s sales improved in all its business and geographic regions.

3M continues to deliver sustainable increases in sales, earnings and free cash flow.

Revenue

Total revenues for the quarter increased 11% year over year to $6.9 billion. This was higher than the Zacks Consensus Estimate of $6.81 billion. The increase in sales was 11.1% in terms of local currency and including acquisitions. Sales in the quarter were negatively impacted by 0.1% on account of divestures.

3M delivered an organic volume growth of 11% year over year in the most recent quarter. For three consecutive quarters, the company has generated a net growth of about 8% to 9% above the market.

The increase in revenue was primarily led by double-digit sales increases in four of the company’s six business segments, led by Electro and Communications at 25% and Display and Graphics at 19%, 14% in Industrial and Transportation, 11% in Consumer and Office and 2% in Health Care. Asia-Pacific was the star performer amongst all geographic regions with a 28% sales increase.

Operating income was $1.576 billion with margin of 22.9%. Operating margin exceeded 20% in all business segments for the third consecutive quarter.

Third-quarter net income was $1.1 billion, or $1.53 per share, versus $957 million, or $1.35 per share, in the corresponding quarter of the prior year.

Balance Sheet

3M continues to maintain a sustainable free cash flow position. Cash and equivalents stood at $5.8 billion with long-term debt at $5.1 billion and shareowners’ equity at $15.8 billion.

Outlook

Revenues of 3M is now expected to grow by 13.5% to 14% organically for 2010. The company also reaffirmed its expectation for operating margin to be around 22.5% for 2010.

Earnings per share expectation for 2010 are in the range of $5.70 to $5.74. This includes dilutive effects of October 2010 purchases of Attenti Holdings S.A. and Arizant Inc. and acquisition of a controlling interest in Cogent Inc. The 2010 earnings per share guidance exclude the Medicare Part D-related charge recorded in the first quarter of the year.

The company’s strong results and continued outperformance in emerging markets like China, India, etc. strengthens our conviction that 3M Co. will deliver stronger results ahead. We believe that continued capital expenditure with new product launches should bolster its prospects across most end-markets.

The 3M brand is recognized and trusted around the world. Household names like Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard are market leaders. This has led to household recognition of its brands across the globe.

However, results have been impacted by worldwide economic and capital market conditions. Negative consumer sentiment is impacting retail store traffic. On the corporate side, lower employment levels are negatively reducing office supply purchases in most companies.

We currently have a long-term Neutral recommendation on 3M Company.

 
3M CO (MMM): Free Stock Analysis Report
 
Zacks Investment Research