Manufacturing conglomerate 3M Co., whose brands include Scotch tape and Post-it notes, reports earnings for the second quarter on Thursday before the opening bell. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: During the quarter, the diversified manufacturer, which also makes asthma inhalers, film used in LCD televisions, aerospace, electrical products and fire protection items, among a long list of other offerings, announced the acquisitions of two companies, including Quest Technologies Inc., a manufacturer of environmental monitoring equipment.
The addition of Quest's sound monitoring technology to 3M's portfolio broadens its presence in the industrial hygiene and safety equipment markets, the company said. The deal closed July 1 for an undisclosed price.
3M also plans to buy German orthodontics company TOP-Service fur Lingualtechnik GmbH to bolster its existing orthodontics portfolio.
Separately, the company ended a collaboration with Gen-Probe Inc. to develop rapid tests for infections developed in hospitals, after the companies discovered their respective technologies were incompatible.
3M also said it would build a new facility in Singapore to produce coatings for film-based products used in commercial, electronic and automotive applications. The company's aerospace and aircraft maintenance unit also announced plans to build a factory in Wroclaw, Poland, to help increase 3M's manufacturing capacity for structural bond adhesives and surface protection products. The factory is expected to open by late 2009.
BY THE NUMBERS: Analysts expect 3M to post quarterly earnings of $1.35 per share on revenue of $6.69 billion, according to a Thomson Financial poll.
ANALYSTS TAKE: Citigroup analyst Jeffrey Sprague was cautious on 3M's upcoming results. "Our primary concern is that 3M has relatively high consumer exposure across much of its portfolio," he said. In particular, he said profit has eroded in 3M's LCD television business, due in part to weaker demand.
Other potential issues that could weigh on results include additional plant startups and higher raw materials costs, said Sprague in a recent note to clients.
Lehman Brothers analyst Shannon O'Callaghan said in a note it could get worse for 3M in the second quarter, as the company continues to struggle with pressure on organic growth and on its optical film business.
WHAT'S AHEAD: In a separate client note, Citigroup's Sprague said the environment for industrial companies like 3M is now more challenging due to a risk of getting negatively surprised by a drop in demand or rising costs.
"We are still seeing decent activity in many industrial markets and many companies are passing on price, but we are increasingly concerned that activity could slow abruptly," said Sprague.
STOCK PERFORMANCE: The stock fell 12 percent in the second quarter to end the period at $69.59. Since the start of the year, 3M's stock has tumbled 18.2 percent to close at $68.73 on Monday.
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