3M (MMM) Q3 Earnings and Revenues Beat Estimates, Up Y/Y
3M's (MMM) third-quarter 2021 revenues increase 7.1% year over year on account of impressive performance across its segments.
3M Company MMM reported solid third-quarter 2021 results. Its earnings surpassed estimates by 12.39% and sales exceeded the same by 3.18%. This is the company’s seventh consecutive quarter of earnings beat.
Its adjusted earnings in the reported quarter were $2.45 per share, surpassing the Zacks Consensus Estimate of $2.18. The bottom line also increased 0.8% from the year-ago quarter figure of $2.43.
The results gained from lower tax rate (9 cents) and other tailwinds (8 cents). However, organic volume /productivity and other, price/raw material, foreign currency movements, and shares outstanding had adverse impacts of 2 cents, 12 cents, 1 cent, and 2 cents, respectively.
In the quarter under review, 3M’s net sales were $8,942 million, reflecting growth of 7.1% from the year-ago quarter. The company’s net sales also surpassed the Zacks Consensus Estimate of $8,667 million.
Results benefited from a 6.3% year-over-year increase in organic sales and a 0.8% gain from movements in foreign currencies.
Region wise, sales in the Americas increased 7.9% year over year while that in the Asia Pacific grew 6.8%. Business in the Europe, Middle East and Africa region improved, with sales increasing 5.2% year over year.
The company reports top-line results under four business segments — Safety & Industrial, Transportation & Electronics, Health Care and Consumer. The segmental information is briefly discussed below.
Revenues from Safety and Industrial totaled $3,235 million, increasing 7.2% year over year. The improved performance resulted from a 6.1% increase in organic sales and a 1.1% contribution from movements in foreign currencies.
Revenues from Transportation & Electronics totaled $2,450 million, reflecting a year-over-year increase of 5.8%. Results gained from 5.1% growth in organic sales and a 0.7% contribution from movements in foreign currencies.
Revenues from Health Care were $2,249 million, up 4.1% year over year. The results benefited from a positive impact of 3.3% from organic sales and a 0.8% gain from movements in foreign currencies.
Revenues from Consumer increased 8.1% year over year to $1,525 million. Organic sales improved 7.6% and movements in foreign currencies had a positive impact of 0.5%.
3M Company Price, Consensus and EPS Surprise
In the quarter under review, 3M’s cost of sales increased 12.8% year over year to $4,853 million. It represented 54.3% of net sales compared with 51.5% in the year-ago quarter. Selling, general and administrative expenses jumped 8.5% to $1,819 million. It represented 20.3% of net sales compared with 20.1% in the year-ago quarter. Research, development and related expenses increased 4.6% to $482 million. It represented 5.4% of the quarter’s net sales.
Adjusted operating income in the quarter decreased 6.3% year over year to $1,788 million.
Operating margin decreased 290 basis points to 20%. The tax rate in the quarter was 18.4% compared with 21.5% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, 3M had cash and cash equivalents of $4,878 million, reflecting increase from $4,695 million at the end of the last reported quarter. Long-term debt balance decreased 0.5% sequentially to $16,193 million.
In the reported quarter, the company generated net cash of $1,874 million from its operating activities, reflecting a decrease of 24.4% from the year-ago quarter. Capital used for purchasing property, plant, and equipment decreased 6.8% to $343 million. Adjusted free cash flow in the quarter was $1,531 million, down 27.5% from $2,112 million generated in the year-ago quarter. Adjusted free cash flow conversion was at 107%.
In the quarter, the company used $856 million for paying out dividends to shareholders and repurchased $527 million treasury shares. It paid out dividends of $847 million and refrained from repurchasing shares in the year-ago quarter.
For 2021, 3M updated its projections. Adjusted earnings are expected to be $9.70-$9.90 per share compared with $9.70-$10.10 guided earlier. Sales are predicted to increase 9-10% year over year, with organic sales growth of 8-9%.
The company also anticipates cash flow of $6.7-$7.3 billion from operating activities and capital expenditure of $1.5-$1.6 billion. Free cash flow for the year is predicted to be $5.1-$5.8 billion and free cash flow conversion is expected to be 90-100%.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the same space are Carlisle Companies Incorporated CSL, Griffon Corporation GFF, and Danaher Corporation DHR. While Carlisle currently sports a Zacks Rank #1 (Strong Buy), Griffon and Danaher carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carlisle delivered an earnings surprise of 38.89%, on average, in the trailing four quarters.
Griffon delivered an earnings surprise of 26.02%, on average, in the trailing four quarters.
Danaher delivered an earnings surprise of 24.05%, on average, in the trailing four quarters.
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