The Rising Influence of Rising Affluence

[DewDiligence]

3M Forecasts 2011 EPS Growth of 12%

[2011 non-GAAP EPS guidance is $6.17-6.37 (excluding a non-recurring $0.27/sh charge for pension expenses), which is a 12% increase from 2010; at the midpoint of this range ($6.27), the stock is currently trading at a forward P/E of 13.5x, which is certainly not expensive for one of the world’s great companies.

The stock sold off slightly in response to the 2011 guidance because the company said 2011 “organic sales growth,” defined as sales growth excluding acquisitions and currency effects, would be 5.5-7.5%, which is below 3M’s long-term goal of 7-8%. The main reason for the shortfall in this metric is sluggishness in the market for LCD films, as discussed below.]

http://online.wsj.com/article/SB10001424052748703296604576005122549495908.html

›DECEMBER 8, 2010
By JAMES R. HAGERTY

3M Co. said Tuesday that it may fall short of its long-term sales-growth goal next year but earnings will continue to rise, helped by strong economic growth in Asia and Latin America.

The industrial conglomerate told investment analysts at a meeting in New York that its "organic" sales growth—which excludes the effects of acquisitions, price changes and foreign-exchange fluctuations—in 2011 will be 5.5% to 7.5%.

The company's chief executive, George Buckley, has promised to raise the organic-sales rate to between 7% and 8% a year, up from a long-range average of around 4%.

In announcing the latest projection, 3M cited a worsening outlook for its sales of films used to enhance image quality in television screens, one of the company's biggest and most lucrative products.

As prices of flat-screen TVs fall, manufacturers have pressured suppliers like 3M to lower their prices and in some cases are dispensing with the types of films 3M makes. Sales of such films next year will be about $300 million lower than 3M expected as recently as October, it said.

The St. Paul, Minn.-based company makes thousands of products including Scotch tape, Post-it Notes, materials used in signs and advertising, and automotive and medical supplies.

3M forecast earnings per share in 2011 will be in a range of $5.90 to $6.10 [GAAP], up from $5.59 to $5.63 a share expected for 2010 and $4.52 a share in 2009. Excluding an increase in pension expenses, 2011 earnings per share will be up 10% to 14% from 2010 [the 2011 non-GAAP EPS guidance is $6.17-6.37], 3M said.

Mr. Buckley has been trying to rev up 3M's growth by pushing new product development, relying more on fast-growing developing markets like China and India and pursuing acquisitions.

In recent months, 3M has acquired companies involved in biometric identification of people, used in such areas as border controls and access to offices; electronic devices that monitor the movements of people such as Alzheimer's patients or convicts, and products used to keep people warm during medical operations.

Mr. Buckley told analysts that 3M is "on fire with innovation" in such areas as optical films, respiratory protection, dental restoratives and films used in renewable energy.

Developing-country sales are expected to account for 40% to 45% of 3M's total in 2015, up from about one-third now, the company said.

Scott Davis, an analyst at Morgan Stanley & Co., said he reduced his estimate for 2011 earnings per share by 10 cents to $6.10, mainly due to the weaker trend in films for TV screens.

He noted that business has had "a roller coaster history." But Mr. Davis said 3M's overall long-term growth prospects remained strong.‹