As Minnesota-based 3M (NYSE: MMM) happily discovered on Thursday, when the market's soft, a company needn't post stellar earnings to enjoy a bump in its share price.
3M saw its fourth-quarter profit fall by 37% year over year, accompanied by sliding sales in most of its segments. Nevertheless, its shares rose 2%, on one of the now-frequent days in which the Dow Jones Industrial Average -- of which 3M is a component -- fell by triple digits. That may have something to do with how CEO George Buckley -- while painting the first quarter as the "toughest one of this recession for 3M" -- implied on his post-release conference call that the rest of the year could bring slight improvements.
In the most recent quarter, only one of 3M's six operating segments -- Safety, Security, and Protection Services -- chalked up increased sales, by 2.9%.
At the other end of the spectrum, the Display and Graphics group saw sales decline to $685 million, or by 28.4%. The company's largest division, Industrial and Transportation, watched revenue slide by 11.3%. Total sales for the quarter fell to $5.5 billion, an 11.2% contraction.
Looking ahead, the company's earnings-per-share expectations for 2009 have been ratcheted back to a $4.30 to $4.70 range, down from an earlier $4.50 to $4.95 prediction. At the same time, management expects to trim capital spending by about 30% for the year. And, as it announced last month, it'll cut about 2,400 jobs worldwide. The latter move is becoming more commonplace, putting 3M in the company of equipment maker Caterpillar (NYSE: CAT) and aviation manufacturer Boeing (NYSE: BA). Direct competitors Avery Dennison (NYSE: AVY) and DuPont (NYSE: DD) have each announced that they will lay off approximately 3,600 and 2,500 employees, respectively.
What should Fools do with 3M now? After Thursday, I'd watch the company carefully. Indeed, I might even nibble away at a small position once it appears the company's shares have stabilized. With a forward P/E slightly greater than 12, a return on equity of 32.6%, and a forward yield of 3.6%, the market could be relatively kind to this stock in 2009.
3M is a five-star stock in Motley Fool CAPS. Is your vote included in the company's rating?
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