3M Earnings Enough to Pay for Improved Dividend

Source: Courtesy 3M Company

3M Co. (NYSE: MMM) reported fourth-quarter and full-year 2013 results before markets opened Thursday. For the quarter, the conglomerate posted diluted earnings per share (EPS) of $1.62 on revenues of $7.57 billion. In the same period a year ago, the company reported EPS of $1.41 on revenues of $7.39 billion. Fourth-quarter also results compare to the Thomson Reuters consensus estimates for EPS of $1.62 and $7.71 billion in revenues.

For the full year, 3M reported EPS of $6.83 on revenues of $30.87 billion, compared with EPS of $6.40 on revenues of $29.9 billion a year ago. The consensus estimates called for EPS of $6.72 on revenues of $31.02 billion.

The company’s shares rose more than 50% in 2013 and 3M raised its quarterly dividend 35% in mid-December to $0.855 per share. The stock price has pulled back by about $10 a share, down 7% from 52-week highs set in late December. 3M’s share price, like many other blue chip stocks, has taken a hit in recent weeks as investors worry about a slowdown in emerging markets where the blue chips were focusing their attention in an effort to grow their revenues and profits. That strategy has had a few holes poked in it, to say the least.

The company reaffirmed earlier guidance for 2014. 3M expects EPS in a range of $7.30 to $7.55 and organic, local-currency sales growth of 3% to 6%. The consensus estimates for the first quarter call for EPS of $1.80 on revenues of $8.01 billion. For the full year the consensus estimates call for EPS of $7.47 and revenues of $32.61 billion.

In the recently completed fourth quarter, currency translation in the company’s consumer products division reduced sales by 2%, while organic, local-currency growth increased by just 1.3%. The company’s other divisions performed better, but the company’s sales targets are not very aggressive.

The company’s CEO said:

We generated broad-based, profitable sales growth across the portfolio and per-share earnings rose nearly 15 percent in the quarter. Free cash flow conversion was 131 percent, which enabled us to continue investing in our businesses while also returning a record amount of cash to shareholders.

3M shares were up about 0.6% in premarket trading this morning at $131.01, in a 52-week range of $100.06 to $140.43. Thomson Reuters had a consensus analyst price target of around $142.20 before today’s report.