As an investor, I'm inclined to say something like, "Don't throw me in that briar patch," regarding 3M's (NYSE: MMM) latest quarterly earnings.
Sure, the company checked in with lower earnings in the most recent quarter than it did in the same period a year ago. Income was down 28% to $988 million, or $1.38 per share. Those figures compare to $1.37 billion, or $1.85 a share, in the first quarter of 2007. But the earlier period included a gain of $422 million, $0.57 a share, relating to the sale of 3M's European pharmaceutical business.
So, unless I've lost my ability to execute higher math flawlessly, without the asset sales, the prior period's per-share income was $1.28, or a dime below the March 2008 period. Sales in the latter quarter were up 9% to $6.5 billion, although two-thirds of the percentage gain resulted from the softening dollar. About two-thirds of the company's revenues are generated internationally.
Of 3M's six segments, only Display and Graphics suffered a sales decline, leading to a 37% drop in operating income as price competition hit the LCD television market. Otherwise, the other groups, led by the Industrial and Transportation segment -- with its 17.1% growth in sales to $2.1 billion -- all experienced sales increases.
It seems that this earnings season has spurred a bifurcation (that's statistician-speak for "a house divided") among reporting companies. On the industrial side, after General Electric (NYSE: GE) led off with disappointing results, such other big companies as Caterpillar (NYSE: CAT), Honeywell (NYSE: HON), and 3M have followed up with solid numbers, albeit largely based on overseas sales.
That group has been offset by big banks like Citigroup (NYSE: C) and Bank of America (NYSE: BAC), whose collective quagmire will likely slow the domestic economic recovery. As such, we may experience several more quarters of 3M and its peers generating their strongest results internationally.
That international concentration is one of several reasons why I'm high on 3M. At the same time, the company offers a 14.2 forward 2008 P/E and a return on equity approaching 38%, and starts investors off with a 2.5% dividend yield. For my money, that combination should be attractive to Fools looking for income, upside potential, and international exposure.
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