There's a growing trend among major U.S. industrial corporations that includes reduced revenues and earnings, concerted cost cutting, and decreases in earnings expectations for much of the remainder of 2009. As last week came to a close, Minnesota-based 3M (NYSE: MMM ) followed the trend previosuly set by DuPont (NYSE: DD ) and Honeywell (NYSE: HON ) .
However, following the lead of Wisconsin-based manufacturer Johnson Controls' (NYSE: JCI ) CEO, Stephen Roell, 3M's chief executive also displayed some new optimism about the second half of this year. CEO George Buckley expressed a belief that the current economic softness will reach its nadir early in the second half of the year. Nevertheless, he also reduced 2009 EPS expectations by 9%.
In the meantime, the company -- which makes a variety of items, including Scotch tape, health-care products, and the Post-It notes we all use so avidly -- experienced what can only be described as a tough quarter. Its reported net income was $530 million, or $0.74 per share. That represents a 47% decline from the $1 billion, or $1.38 per share, in the first quarter of 2008. Net sales for the most recent quarter were $5.1 billion, down from $6.5 billion.
3M operates through six separate units, with Health Care, where sales were $1 billion in the most recent quarter -- down 7.7% from a year ago -- being the largest contributor to the bottom line. For the sake of perspective, Johnson & Johnson (NYSE: JNJ ) , which also operates in the health-care space, experienced a relatively comparable 7.2% sales decline in its most recent quarter.
Only one other segment, Consumer and Office, was limited to a single-digit sales decline, while the other four units all checked in with double-digit slides. The most pronounced were Display and Graphics, which fell by 30.2% and Electro and Communications, which dropped by 34.8%. In fairness to the company, several of the declines were worsened by foreign currency translations.
Still, given 3M's array of products, I'm inclined to be something of a fan. That position is strengthened by its 32% return on equity, its 22% operating margin, and its 3.60% dividend yield. Furthermore, I hope George Buckley is correct about the possibility of at least a slow recovery during the second half of this year.
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