CHICAGO – 3M Co. (MMM) Monday said third-quarter earnings rose 17 percent due in part to the weak dollar, but the diversified manufacturer's results came in below Wall Street's estimates for the first time in at least seven quarters.
The maker of Scotch tape (search) and Post-It notes (search) also forecast weaker-than-expected earnings in the current quarter and sounded a note of caution on the global economy, sending shares down more than 5 percent and slicing 30 points off the Dow Jones industrial average (search).
"We look at 3M as the best proxy for world (gross domestic product) growth, and we're not surprised by its results," said Tim Ghriskey, chief investment officer with Solaris Asset Management. "It really goes hand in hand with what's been happening with the economy, growth slowly ratcheting down."
"This is the type of results we think we'll see across a lot of companies for the third quarter earnings season," added Ghriskey, whose firm owns a small stake in 3M.
The St. Paul, Minn.-based company, which also makes medical products, optical films and other products, reported a third-quarter net profit of $775 million, or 97 cents a share, compared with $663 million, or 83 cents a share, in the year-ago quarter.
Sales in the quarter rose 7.6 percent to $4.97 billion from $4.62 billion last year.
Analysts were expecting 3M to post a third-quarter profit of 98 cents a share on sales of $5.02 billion, according to Reuters Estimates.
Global sales volumes rose 5.6 percent, while selling prices fell by one-half of a percent. Currency effects boosted sales by 2.5 percent.
U.S. sales in the third quarter rose 3.5 percent to $2.06 billion, while international sales increased almost 11 percent to $2.91 billion. Favorable currency translation effects increased international sales by 4.4 percent.
In July, 3M forecast a third-quarter profit of 97 cents, with sales volume up 5 to 7 percent.
3M Monday forecast fourth-quarter earnings before one-time items of 90 cents to 91 cents a share, compared with analysts' expectations for about 92.5 cents a share according to Reuters Estimates.
"We are optimistic about the strength of our diverse business and technology portfolio, but remain cautious on the global economy," 3M Chairman and Chief Executive James McNerney said in a statement.
Including one-time items, it expects a fourth-quarter net profit of 84 to 85 cents a share. The items, expected to total 6 cents a share, include the potential impact of pending legislation to encourage the reinvestment of foreign earnings in the United States and a anticipated accounting change.
The company expects full-year earnings before one-time items of $3.74 to $3.75 a share, compared with analysts' estimates for $3.77 a share according to Reuters Estimates. It previously forecast $3.72 to $3.75. Including the one-time items, it expects a full-year net profit of $3.68 to $3.69 and sales volume growth of about 7 percent.
3M also said it made special contributions of $455 million to its global pension plans in the third quarter.
Shares fell $4.27 to $73.71 on the New York Stock Exchange (search).