In late July, 3M (NYSE:MMM) announced that second-quarter sales dropped 12.2% year over year, marking the lowest quarterly net sales total in more than five years. However, at the time, it noted an improvement in the first three weeks of July, with sales up "low-single digits year-on-year." Last week, 3M announced that total July sales actually increased 6% compared to the prior-year period.

The July gains were led by a 29% sales increase in its healthcare segment. It also saw increases in its consumer segment and its safety and industrial segment. The only segment showing a decrease was its transportation and electronics segment. Let's dig a little deeper to see what may be behind the positive shift in its business. 

disposable face masks on top of 100-dollar bills

Image source: Getty Images.

Pandemic response

3M has been adding production capacity for N95 respirators since January due to surging global demand related to the coronavirus pandemic. It initially doubled capacity to 1.1 billion per year and then said it would almost double it again. During its second-quarter earnings call, the company said it produced 800 million N95s in the first half of the year and is on track for 2 billion in 2020: triple the volume it produced in 2019. 3M is also working to fight fraudulent behavior related to its personal protective equipment (PPE) and has filed 18 lawsuits and had over 7,000 counterfeit websites removed.

Moving the needle

As strong as the growth has been for personal safety products, the COVID-19-related respirator business only grew by $225 million in the second quarter, the company said, or just over 3% of total sales for the period.

3M's second-quarter results were also helped by demand in the personal safety, home improvement, general cleaning solutions, semiconductor, data center, and biopharma filtration categories. However, growth in those businesses was more than offset by weakness in other areas. The company felt impacts from the pandemic in its automotive business, healthcare elective procedures, general industrial, commercial solutions, and office supplies, which combined to have a bigger impact on the top line.

Widespread improvement 

While the company said July showed "broad-based improvement in sales trends across businesses and geographies," the headline numbers were somewhat misleading, as they included contributions from acquisitions. 

The company said acquisitions boosted its top line by 3%, net of divestitures, bringing the sales results more in line with what the company had previously reported in late July. But the swing to growth in July is still notable. Excluding acquisitions, the healthcare segment grew by 11%, consumer increased 9%, and safety and industrial jumped 8%, compared to July 2019. Transportation and electronics declined by 6% on that basis. 

Waiting to see if it's a trend

An industrial conglomerate like 3M can be a good indicator of the overall economy. Investors will have to wait for the third-quarter earnings release to see if July marks the start of a longer-term trend out of the economic pain caused by the pandemic. Specific businesses within each segment will likely take different paths to recovery.

In the meantime, 3M investors are getting paid to wait. The company announced it is maintaining its $1.47 per share dividend for the third quarter, resulting in an annualized dividend yield of about 3.5%. That's not a bad return in this low-yield environment, particularly if the third-quarter results reveal a longer-term recovery trend.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.