3M Co. Earnings: Will Growth Soar This Quarter?

On Thursday, 3M (MMM -0.27%) will release its quarterly report. Investors have stayed confident in the conglomerate's prospects even as the stock took a big dip downward over the past couple of months. Yet while fellow Dow component conglomerates General Electric (GE 1.99%) and United Technologies (RTX 0.82%) have done a good job focusing on specific growth areas that they see as having the greatest potential for the future, 3M still needs to establish the sort of strategic vision that can restart the company's innovation engines in the coming years.

3M has a long history of being at the cutting edge, whether it's with apparently simple advances like the stickiness that made Post-It Notes a staple of the office products world or much more sophisticated materials used in applications like solar energy and medical care. Having received criticism that it had lost its innovative spirit, 3M has worked at boosting its research and development focus in order to find the important new technologies of tomorrow. Let's take an early look at what's been happening with 3M over the past quarter and what we're likely to see in its report.

Source: 3M

Stats on 3M

Source: Yahoo! Finance

Will 3M earnings be able to grow as fast as investors think?
In recent months, analysts have been just a bit less optimistic about 3M earnings, cutting a penny per share from their full-year 2014 estimates and a nickel per share from their 2015 projections. The stock has gained just 1% since mid-January, but bounced back from bigger losses in early February.

3M's fourth-quarter-earnings report showed the slow but steady progress that the conglomerate has been able to make recently. Sales climbed 2.4%, but 3M managed to boost earnings by almost 13%. Moreover, 3M maintained its previous guidance for 2014, which included organic sales growth of between 3% and 6%. Growth has been a key goal for 3M, with higher R&D spending having helped foster gains even as currency headwinds held back the company's overall financial results.

Yet like General Electric and United Technologies, 3M's prospects aren't the same company-wide. Recently, the company has seen developed markets in the U.S. and Europe grow at a faster pace than emerging-market areas like the Asia-Pacific and Latin American regions. Although country-specific issues in Venezuela and Argentina pose a threat, the potential impact is small compared to 3M's overall size. From an industry standpoint, 3M's industrial, safety, and graphics businesses have produced the most growth, while consumer and health-care results pulled back.

Source: 3M

Still, 3M's overall strategy isn't as transparent as that of some of its peers. General Electric has made a huge push into the energy space, while United Technologies has emphasized aerospace. But 3M still responds to speculation largely because investors don't necessarily have the strongest sense of where the company is trying to go. For instance, 3M soared in late February on reports that the company is looking to sell parts of its electronics division, which has underperformed other areas of 3M's business and could bring as much as $1 billion in proceeds from an interested buyer.

Yet part of 3M's strength comes from its refusal to focus too much. With its breadth of product offerings, 3M defies competition and gives itself a major competitive moat to hold rivals back. As long as 3M gives customers innovative new products, the conglomerate generally maintains huge pricing power that lets it keep extremely high margins compared to General Electric, United Technologies, and other companies.

In the 3M earnings report, watch for hints of the company's future strategy, and how the company's massive $12 billion buyback has progressed. For a stock that already has a long history of treating investors well with solid dividends, buybacks could add just another element to the bullish case for 3M stock.

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