3M (MMM, Financial) is scheduled to release its fourth-quarter earnings before the opening bell on Thursday, Jan. 25. The industrial good manufacturer is expected to have a rise in revenue on the quarter, with investors concerned that a rise in revenue may not translate to bottom-line growth.
The company's top line has been the focus of organic growth, with 3M investing heavily on the company's commercialization capabilities and infrastructure. The company has spent a significant amount of money on research and development.
The company also made headlines in October when it sold off its Communication Markets business. The segment sold for $900 million and was divested so that 3M could focus its efforts on its core business.
3M's portfolio has shrunk from 40 businesses to 24 due to intense restructuring. The move has allowed the company to maintain focus on growth in core sectors, with the company on track to post 10-12% earnings per share for full year 2017.
Portfolio restructuring has been a key focus of the company since 2012. 3M has divested assets that no longer fit into the company's future goals. The company has also diversified into several industries, including offering autoglass repair kits, light shielding tape, and safety and graphics.
The company's largest segments are expected to be safety and graphics with revenues of $1.45 billion, electronics and energy with $1.2 billion in revenue, and health care, which is expected to drive $1.48 billion in revenue in the final quarter of 2017.
Analysts project the company's revenue to rise by over $500 million compared to the same quarter a year prior.
Revenue across all segments is expected to rise, with the industrial segment expected to continue to generate over 33% of the company's revenue.
MarketWatch reported that investors fear that 3M will not benefit as much as other companies from the tax changes under the Trump Administration. The company's U.S. sales account for less than 40% of all 3M sales, which is a major reason why they will not benefit from the tax breaks as much as other companies.
Analysts suggest that 3M may be undergoing a valuation discount in the coming months.
The company's December investor presentation indicated that 3M is projecting per-share earnings to rise by as much as 10% over 2017 earnings. The company's earnings are expected to be between $9.60 and $10 a share for full year 2018.
Revenue for the final quarter of 2017 is expected to be $7.8 billion to $7.9 billion. The company's stock has performed exceptionally well in the past 12 months, rising 38% during the year. 3M remains an attractive option for investors due to the company's dividend history.
3M has maintained its dividend payouts for 59 years straight and has over 60,000 products in its portfolio. Annual dividend yields average 1.97%, which is lower than other companies, but still maintains an almost unmatched consistency level.
3M stock remains down over 0.75% going into the middle of the week.
Investors are confident that the company's fourth quarter earnings will help boost 3M's stock going into the latter end of the week.
Disclosure: Author does not own any stake in the listed equity.
