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HenryTo
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 Posted: Thu Dec 10, 2009 5:53 am Post subject: 3M (MMM) |
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The mood at 3M's investor day makes a decisive change from last year:
http://quicktake.morningstar.com/stocknet/san.aspx?id=319103&djnsection=SAN1
| Quote: | | We attended 3M's MMM investor day Tuesday in New York City, where we found the positive mood of the event refreshing compared with last year's (understandably) negative outlook. Although the firm remains cautious regarding a sharp economic rebound, we think it has the high-class problem of capital-allocation decisions (the firm held $3.2 billion in cash on its balance sheet at the end of the third quarter versus $1.8 billion nine months ago) rather than an imminent need for cash preservation. We think 3M will continue to generate above-average returns on invested capital through internal gains as well as acquisition activity. We're sticking with our fair value estimate, as the company's 2010 outlook is in line with our assumptions. |
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3M (MMM) Replies |
HenryTo
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| Posted: Wed Apr 25, 2012 4:37 pm Post subject: |
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Morningstar on MMM's 1Q earnings.
| Quote: | | We plan to maintain our $100 per share fair value estimate for 3M MMM after reviewing the firm's first-quarter results, filed on Tuesday. During the period, organic growth slowed to a halt (volume was up just 0.1% year-over-year versus 1.3% in the prior quarter), but the company managed to further increase prices at a decent clip, contributing 1.7% to the total top line. Importantly, these pricing actions also substantially outpaced both raw material costs and increased pension expenses, and 3M enjoyed increased profitability as a result. In fact, the company's widened operating margin (to 21.8% from 21.6% a year ago) was the first quarterly year-over-year expansion since the second quarter of 2010 (although we note that this was aided by negative effects in last year's first quarter by Japan earthquake-related headwinds). Not surprisingly, North America offered solid growth in the period, with volume up 3.2% from last year, but growth subsided worldwide compared with year-over-year rates in the fourth quarter. That said, 3M still looks on track to meet its full-year organic revenue growth target of 2%-5%, with operating margins slightly ahead of 2011's levels. During the quarter, 3M saw local currency sales growth (volume and price) fall to 0% in its Europe, Middle East, and Africa geography, but not all pieces of this division were negative; although Western Europe was down slightly year over year, Eastern Europe and the Middle East together rose nearly 6%. China remained weak because of optical film difficulty (down 28% due to weakness in LCD TVs and a difficult comparison from a year ago) and generally slower growth, but here again management noted some areas of strength such as health care and telecom. The company also saw further improvement in global automotive, aerospace, abrasives, and personal safety demand, continuing trends seen over the past few quarters. Margins remained challenged in the toughest-hit areas (the aforementioned optical films business and consumer electronics), but we were encouraged to see profitability expand at four of the firm's six segments. With improved profitability, 3M improved its cash generation versus a year ago, converting 50% of net income (including pension contributions) to free cash flow versus 46% a year ago. The firm now estimates it will hit the high end of previously estimated pension contributions for the year (about $1 billion, up from around $600 million in 2011), but still targets 90% free cash flow conversion, in line with last year's 91%. Although working capital requirements have increased at a slightly faster pace than sales over the past two years, these line items are still in line with pre-recession levels as a percentage of annualized sales. As such, we think the company's planned $2 billion-$2.5 billion of share repurchases in 2012 (about $1.3-$1.8 billion over the next nine months) is well funded, and we remain confident in 3M's solid balance sheet. |
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HenryTo
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| Posted: Wed Feb 08, 2012 4:17 pm Post subject: |
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Morningstar on 3M's new CEO.
| Quote: | On Wednesday, 3M's MMM board elected COO Inge Thulin as CEO (and chairman, beginning May  , succeeding George Buckley, who is retiring after several quarters of speculation surrounding his future with the firm. We generally applaud Buckley's six-year tenure at 3M, where we believe he helped to reinvigorate the company's research-driven success while maintaining terrific financial health and excellent profitability. We also like that the board is returning to internal promotion (Buckley was just the second CEO brought in from outside the firm), as we believe investors should be pleased with the company's current direction. We don't think the change in leadership will meaningfully alter this tr ajectory, and Thulin brings with him several years of leadership in 3M's international operations, which should benefit the firm, given the outsize growth potential in overseas markets. We plan to maintain our $100 fair value estimate following this news, and we reiterate our belief that 3M's wide economic moat is intact. |
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HenryTo
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| Posted: Thu Jan 26, 2012 4:02 pm Post subject: |
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Morningstar on 3M's latest earnings.
| Quote: | | On Thursday, 3M MMM reported continued slowing internal sales growth and profitability erosion, as further struggles in the display and graphics segment, seasonal weakness in consumer and office, and increased pension costs offset strong growth in the industrial business. For the quarter, consolidated revenue climbed 5.7% year over year, but the 1.3 percentage points of internal volume growth within this figure was the lowest since a decline in the third quarter of 2009. Still, we're encouraged that the company was able to once again garner substantial price improvements (up 2% in the quarter and 1% for the full year), while still seeing decent growth in th e United States (volume up 3.7%) and Latin America (up 8.6%). Although 3M's operating margin slipped slightly from a year ago (to 19.2% from 19.4%), management reaffirmed its 2012 outlook, which is in line with our current projections. We plan to maintain our $100 fair value estimate. The display and graphics business saw further difficulty in the quarter, with revenue falling 8.8% year over year. Once again, optical film led the march downward, dropping 17%, although operational improvements led to a 330-basis-point jump in operating profitability for display and graphics. Elsewhere, margins remained relatively flat with the fourth quarter of 2010, but the company saw a 100-basis-point headwind from higher pension costs. We expect quarterly profitability to improve, as the fourth quarter has proved to be seasonally weak, and we feel comfortable with our 2012 operating margin estimate of 21%-22%, slightly above 2011's levels. We're encouraged that the company is seeing bright spots in key areas; in the fourth quarter, it enjoyed double-digit top-line increases in abrasives, aerospace, industrial adhesives, and personal safety. However, we caution that the quarterly declines seen in display and graphics and electronics (down high single digits) have tended to lead weakness in the other segments in the past. As such, we think management's full-year target of 2%-5% internal sales growth, with weak first-half results due to difficult year-over-year comparisons and continued European challenges, seems reasonable. 3M continues to enjoy a great deal of balance sheet flexibility and finished the year with nearly $3.7 billion in cash and marketable securities versus $5.2 billion in debt. The company has already announced the $550 million purchase of Avery Dennison's AVY consumer and office segment, and we anticipate further bolt-on purchases as the year progresses. |
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rffrydr
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Location: Sunny California
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| Posted: Tue Oct 25, 2011 10:39 pm Post subject: |
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LEX:
3m: a Post-it note to the wise
If it is thin, sticky, abrasive, reflective or absorptive, and it is used in a factory or an office, there is a reasonable chance that 3M makes it (along with assorted items that fit none of these descriptions). But highly diversified companies can deliver surprises, too, and sometimes nasty ones. On Tuesday, third-quarter results from the US industrial conglomerate were a bit light relative to estimates. More important, the company brought down its target for full-year organic sales volume growth (from 6-7.5 per cent to 3-4 per cent) and shaved a bit off earnings per share targets as well. Shareholders were less than pleased, sending the shares down more than 6 per cent.
The softening outlook is made more difficult by the fact that recent reports from other broad-based industrial groups, such as Parker Hannifin and Eaton, do not share 3M’s gloom (though it is hard to make comparisons among companies that, for all their diversity, serve different end-markets). Still, the surprise and consternation implied by the price change seems a bit overdone. A look at the history shows that the company, in good years such as 2006 or 2007, grows volumes in the mid-to-high single-digit range. And if the global economy slows, growth quickly follows: volumes were off 2 per cent in 2008 and 10 per cent in 2009.
The reason to keep owning 3M’s shares, however, is that management keeps the company on a very steady path financially, even as demand fluctuates from year to year. 3M spends steadily on research and development and spits out a steady stream of cash – since 2008 it has spent $10bn on dividends and buy-backs. Even during the horrible 2009, margins held and free cash flow did not fall alongside sales. This matters more than the top line. Post-it to self: 3M can be a low single-digit grower and that’s OK.
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HenryTo
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Location: Los Angeles, California
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HenryTo
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Posts: 11707
Location: Los Angeles, California
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HenryTo
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Joined: 06 Aug 2004
Posts: 11707
Location: Los Angeles, California
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| Posted: Wed Apr 27, 2011 12:51 pm Post subject: |
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Morningstar on 3M's 1Q earnings:
| Quote: | | We plan to maintain our $100 fair value estimate for 3M MMM after taking a look at the company's first-quarter results, filed Tuesday. The firm continues to churn out impressive sales growth and profitability, with volume climbing a robust 9% year over year during the period. Total revenue (including 3 percentage points of positive currency effects) jumped 15%. Operating margins slipped about 120 basis points to 21.6% from the same quarter a year ago, but negative effects stemming from the Japanese disaster constituted about 40 basis points of this decline. We suspect the company is still seeing continued raw-material cost challenges; however, we were encouraged to see profitability rebound sharply from 19.4% in the fourth quarter, driven largely by increased gross margins. We expect continued positive price action to further offset input cost pressure. Not surprisingly, emerging markets such as India, China, and Brazil continued to drive sales growth for 3M during the quarter (up 24% from a year ago, to 34% of revenue), but the firm saw double-digit growth in the United States and Europe as well. On a segment level, the company enjoyed its strongest top-line gains in its industrial and electro businesses (similar to the past couple of quarters, outside the volatile optical films unit). Profitability also improved sequentially in every segment, with each business above 21% operating margins; we believe the weak margins seen in the fourth quarter of 2010 were probably an exception driven by poor pricing actions rather than a new run rate. On the basis of this positive performance, management raised its full-year outlook slightly ahead of our current expectations. Excluding a $0.22 per share negative impact from increased pension expen ses, the company now forecasts earnings per share in the $6.27-$6.47 range, up from $6.17-$6.42. That said, results could have been even better; management believes that lingering effects from Japan will reduce EPS by about $0.10-$0.13. As a result, we plan to adjust our near-term assumptions for the company, but we believe our long-term projections remain intact. We're still encouraged by 3M's balance sheet. Although the cash and marketable securities balance slipped to about $4 billion from $4.5 billion at the end of 2010, mostly because of acquisition spending and renewed share repurchases, the firm's 8.6% net debt/net capital is still quite low, in our opinion. We believe this firm has ample liquidity for further merger and acquisition activity. |
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