CHICAGO – Diversified manufacturer 3M Co. (MMM) on Tuesday posted a stronger-than-expected 10 percent increase in third-quarter profit on strong demand for its safety and security, and industrial products.
The company, whose shares rose 2.2 percent in premarket trading, also forecast a full-year profit in line with Wall Street's expectations and said its board authorized the repurchase of an additional $300 million of company stock through the end of January.
"We expect global demand for our products to remain strong, and our productivity and pricing initiatives to help offset raw material and energy cost pressure," Chief Financial Officer Patrick Campbell (search) said in a statement, forecasting sales and double-digit earnings per share growth in the fourth quarter.
Net income in the third quarter rose to $853 million, or $1.10 a share, compared with $775 million, or 97 cents a share, in the year earlier quarter. In July, 3M, seen as a benchmark for the U.S. economy, forecast a profit of $1.06 to $1.08.
Excluding a charge related to its acquisition of filtration company Cuno, 3M, whose products range from Thinsulate insulation to Scotch tape to surgical masks and optical film for TVs, earned $1.12 a share. That was 4 cents better than analysts had expected according to a poll by Reuters Estimates.
Investors have received mixed signals about whether the manufacturing sector is slowing.
Higher oil prices and rising interest rates have raised fears of a slowdown, and last week a government report showed the largest decline in U.S. industrial production in more than 20 years. However, conglomerate General Electric Co. (GE) posted higher quarterly profits and described a healthy U.S. economy.
3M shares have fallen 11.7 percent so far this year, underperforming the blue-chip Dow Jones Industrial average and the Standard & Poor's 500 index, which have fallen 4 percent and 1.8 percent, respectively.
Sales rose 8.3 percent from last year to $5.38 billion, above the $5.3 billion Wall Street had forecast.
U.S. sales were up 6.8 percent, while international sales rose 9.4 percent. Worldwide volume rose 6.1 percent.
Sales in local currencies in more than 200 countries increased 7 percent, with selling prices contributing 0.9 percent. 3M said in July it expected local currency growth of 4 percent to 7 percent.
Excluding acquisitions and currency effects, growth at existing businesses rose 5.5 percent, a goal the company has been targeting, said Longbow Research analyst Dmitry Silversteyn, who has a "buy" rating on the stock.
"People were very skeptical they would be able to do it in '05," he said. "Their ability to deliver 5-1/2 percent growth in the third quarter and guide for 4 to 7 percent growth in the fourth quarter really proves the strength of their business model."
For the year, the St. Paul, Minnesota-based company raised the bottom end of its previous forecast for the full-year profit. It now expects to earn $4.24 to $4.25 a share before one-time items, up from its prior range of $4.20 to $4.25. On a net basis, it expects to earn $4.15 to $4.16.
Analysts were expecting 3M to post a full-year profit before one-time items of $4.24.
For the fourth quarter, it sees a profit of $1.02 to $1.03 a share, compared with analysts' expectations for $1.04. It also forecast growth of existing businesses in local currencies of 4 percent to 7 percent.
The increase in the stock buybacks boosts the total authorization to $2.3 billion, of which more than $500 million remains, the company said.
3M shares rose to $74.09 in premarket trading on Inet from its Monday closing price of $72.47 on the New York Stock Exchange.