The Global Demographic Tailwind

[DewDiligence]

3M Clobbers Consensus, Lifts Guidance

[As the manufacturer of a wide array of products used in urbanization and modernization, MMM is a clear beneficiary of the Global Demographic Tailwind. This 3Q09 report is the second time MMM raised 2009 EPS guidance in the past three months; the previous time was in July (#msg-39888932). MMM hit a 12-month high yesterday; the share price is up 91% from its low in March 2009.]

http://www.reuters.com/article/marketsNews/idCNN2253379620091022

›Thu Oct 22, 2009 3:39pm EDT
By James B. Kelleher

CHICAGO, Oct 22 (Reuters) - Diversified U.S. manufacturer 3M Co (MMM) posted stronger-than-expected quarterly earnings and raised its full-year forecast, encouraged by strong demand for consumer electronics and for its respiratory masks, which were snapped up by people afraid of the H1N1 flu virus.

3M said on Thursday its mask factories had been working "24-7" since May trying to keep up, without reducing backlog. Executives estimated that incremental demand related to H1N1 flu virus fears had added somewhere between $80 million and $100 million to its third-quarter sales.

Still, George Buckley, 3M's chairman, chief executive and president, remained cautious about the near term. He said that so far, despite hundreds of billions of dollars of stimulus spending by governments worldwide, consumers remained cautious in most markets.

"We all know the hardest time to forecast sales accurately is at turning points in demand," Buckley said. "I don't think forecasting will get much easier any time soon."

3M, which makes products ranging from Scotch tape to optical films for liquid crystal display televisions, reported third-quarter net income of $957 million, or $1.35 a share, down from $991 million, or $1.41 a share last year. Excluding one-time items, 3M reported income of $1.37 a share. Revenue fell 5.6 percent to $6.2 billion.

The results beat analysts' average forecasts of net income of $1.11 a share, profit excluding one-time items of $1.17 a share, and sales of $5.77 billion, according to Thomson Reuters I/B/E/S.

The company raised its 2009 earnings forecast, saying it now expects full-year earnings to be $4.50 to $4.55 a share, up from a previous range of $4.10 to $4.30 per share.

C. Stephen Tusa, an analyst at J.P. Morgan, called the company's results "near flawless" and said the raised forecast suggested the improving trends were sustainable at least in the near term.

Sales of 3M's display and graphics products rose 5.5 percent during the quarter, while healthcare sales -- including sales of protective face masks -- rose 4.7 percent. Those gains helped offset sales declines in the company's other areas, including consumer and office products.

3M said it planned to invest $20 million to increase respiratory production capacity in Singapore, the latest such expansion this year.

"Our factories have been running flat out since May of this year to keep up with demand," Patrick Campbell, the company's chief finance officer, said during the call.

"And we see back orders well beyond the end of the year."

The company's shares were up $2.77, or 3.6 percent, at $79.10 in late afternoon trading on the New York Stock Exchange.‹