3M Co. (MMM, Financial), a diversified industrial company known for products like Scotch tape and Post-it Notes, said second-quarter revenue increased 1.9% year over year with positive growth across the company’s five business segments.
The St. Paul, Minnesota company reported earnings of $2.58 per share on $7.8 billion in revenue during the quarter. Earnings per share, which included a 33 cents benefit from divestiture gains, increased 24% year over year. 3M increased its operating margin to 28%, which is near a 10-year high and outperforms 96% of global diversified industrials companies.
Summary of earnings by segment
3M operates in five business segments: Industrial, Safety / Graphics, Health Care, Electronics / Energy and Consumer.
The company reported Electronics / Energy sales of $1.2 billion during the quarter, up 7.5% from the prior-year quarter. This increase, which was driven by growth in electronics materials solutions and display materials, represented the largest sales increase among the segments.
3M also reported good sales growth in its Industrial and Health Care segments. The company’s Industrial segment generated $2.7 billion in sales, driven by good sales growth in advanced materials, industrial adhesives and aerospace solutions. Health Care sales increased 1.8% as sales grew in drug delivery systems, food safety and medical consumables.
Company offers good growth potential
CEO Inge Thulin praised the team for delivering “another quarter of strong and broad-based organic growth,” including positive growth in all five business segments. 3M increased its full-year guidance: expected organic local-currency sales growth increased 1% while expected earnings increased $0.10 per share.
3M’s profitability ranks 7 with a GuruFocus business predictability rank of three stars. According to Thulin, the company reported “premium margins and returns,” which outperform over 94% of global competitors.
The company’s share price tumbled 5.48% as the company missed analyst expectations for both revenue and earnings. Despite this, 3M still trades around $198, close to its 10-year maximum price-sales valuation of $213.40.
Ken Fisher (Trades, Portfolio) added 77,214 shares of 3M at an average price of $200.04 during the second quarter.
Disclosure: The author has no positions in 3M.
