Today's stock market
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Industrial stocks climbed higher on earnings, and the Industrial Select SPDR ETF (NYSEMKT:XLI) moved up 0.6%. Health care stocks lagged the broader market; the Vanguard Health Care ETF (NYSEMKT:VHT) fell 0.7%.
Two companies in the Dow boosted that index with large gains after reporting earnings. 3M Co (NYSE:MMM) and Caterpillar (NYSE:CAT) both beat expectations and raised guidance, and investors cheered the results.
3M posts an excellent quarter
Industrial conglomerate 3M beat expectations for third-quarter revenue and profit and raised its outlook for the year, and the market responded by sending its shares up 5.9%. Sales were up 6% to $8.2 billion and earnings per share jumped 8.4% to $2.33. The analyst consensus was for EPS of $2.21 on revenue of $7.93 billion. The company now expects full-year EPS to increase 10% to 12% to a range of $9.00 to $9.10, compared with prior guidance of $8.80 to $9.05.
Organic local-currency sales growth was 6.6% in the quarter, compared with current guidance of 4% to 5% organic growth for the full year. Growth was led by the electronics and energy group, which increased 13.2%, thanks to gains in semiconductor applications, electronic assembly, data center, and automotive electrification. Healthcare sales also increased by 6.9% in constant currency. The company expanded its operating margin to 25% from 24.7% last year, and converted 100% of net profit to free cash flow, about $1.4 billion.
"Coming off a strong first half, our team delivered an even more robust performance in the third quarter -- marked by an eight percent increase in earnings per share, and seven percent organic growth that was positive across all business groups and geographic areas," said CEO Inge G. Thulin in the press release.
The results were excellent for this Dividend Aristocrat, which has focused its business on high-growth areas and has raised 2017 guidance three quarters in a row. Analysts on the conference call dug into the drivers of the gains, and evidently some are concluding that 3M's growth rate is on an upward trend.
Caterpillar beats expectations again
Caterpillar bulldozed through Wall Street's expectations for sales and earnings, and investors sent its shares up 5%. Sales increased 24% to $11.4 billion, handily beating the consensus forecast of $10.7 billion. Adjusted profit per share was $1.95 compared with estimates of $1.27. The company also raised its outlook for full-year revenue to the top end of the previous guidance of $42 billion to $44 billion, and boosted its forecast for adjusted EPS from $5.00 to $6.25.
The strong sales performance was helped by a turnaround in the construction industry in North America, but business was positive across the board. The construction segment, the company's largest, grew sales 37%; resource industries were up 36%; and energy and transportation jumped 12%. Sales into North America were $2.17 billion, up 31%, and Asia/Pacific sales soared 57% to $1.29 billion.
Caterpillar stock has been on a tear since early last year, and has already risen 49% in 2017. The company's heavy equipment sales are often viewed as an early indicator of growth in construction, mining, and energy, and this quarter's results seem to suggest strength in world economies going forward.