CHICAGO – 3M Co. (MMM), the maker of Scotch tape and Post-It notes (search), on Tuesday posted a 16 percent increase in quarterly profit and forecast results for the current year that could top Wall Street's expectations.
3M, seen as a benchmark for the U.S. economy because of its broad array of businesses, offered analysts hope that demand for its products is improving.
"The company sounds positive going into 2005," said Longbow Research analyst Dmitry Silversteyn, who has a "buy" rating on the stock. "In a sense, they're guiding a little bit above consensus" for the year.
It earned $720 million, or 91 cents a share, in the fourth quarter, in line with analysts' expectations according to Reuters Estimates and above the $619 million, or 77 cents a share, in the year-earlier quarter.
Sales in the quarter rose 7.9 percent from last year to $5.1 billion, topping the $5.02 billion analysts had forecast. The weak U.S. dollar increased sales by 4 percent.
The U.S. manufacturing sector has shown strength the last several months. U.S. industrial output (search) grew strongly last month as factories sported their best annual showing in four years.
In October, 3M's profit missed analysts' expectations for the first time in nearly four years and sounded a note of caution on the global economy, forecasting weaker-than-expected fourth-quarter earnings.
It estimated a profit of 90 to 91 cents a share, blaming rising raw material prices and short-term inventory problems in its display and graphics business.
3M, whose portfolio includes medical products, optical films and other products, and other manufacturers have been pinched by high raw materials costs, although tumbling energy prices led producer prices last month to fall at the sharpest rate in 1-1/2 years.
The company, based in St. Paul, Minn., on Tuesday forecast a first-quarter profit of $1.00 to $1.02 a share, compared with analysts' estimates of $1.00 according to Reuters Estimates. It also sees a 2005 profit in the range of $4.15 to $4.25 a share, compared with analysts' estimates of $4.17.
The full-year outlook includes an expected decrease of about 2 cents a share due to an expected change in debt accounting rules. However, it does not include any impact from accounting rule changes related to the expensing of stock options, which 3M expects to implement July 1, or the impact related to possible repatriation of foreign earnings.
3M expects volume growth of between 5 and 7 percent in the first quarter, and between 5 and 8 percent for the year.
Global sales volume at the company rose 4.8 percent in the fourth quarter, while selling prices fell 0.9 percent. Analysts said the decline in prices was not unusual given the number of consumer products 3M sells.
Sales outside the United States totaled $3.1 billion, up 9.5 percent, while volumes rose 4.1 percent and selling prices fell 1.2 percent. Currency translation effects increased international sales by 6.6 percent.
U.S. sales rose 5.4 percent to $2 billion, while volumes rose 5.7 percent and selling prices declined 0.3 percent.
Sales, excluding the impact of currency translation, rose in the consumer and office, safety and security services, industrial, health care and transportation businesses.
However, they fell 7.3 percent in the communications business and slipped 0.8 percent in the display and graphics business, which makes optical films designed to boost the brightness of liquid crystal displays used in televisions, computer monitors and wireless telephones.