Diversified manufacturer 3M (MMM +0.79%) easily topped Wall Street's quarterly expectations and raised the lower end of its full-year guidance.
Investors are rallying into the shares, sending 3M up 17% as of 11:15 a.m. ET.
A big beat thanks to improving margins
3M has required patience from investors, losing nearly half of its value over the past five years as it dealt with a series of liability lawsuits and reworked its business. But 3M appears to be making progress putting the litigation behind it and recently completed the spinoff of its healthcare business. Its first quarter under new CEO Bill Brown came in much better than expected.
The company earned $1.93 per share in the second quarter on revenue of $6.3 billion, topping Wall Street's consensus estimate of $1.68 per share on $5.9 billion. Sales were down year over year, largely because the healthcare business was no longer included.
3M has had success raising prices, which, coupled with ongoing cost-saving initiatives, is driving better profitability. Adjusted operating margin for the quarter hit 21.6%, an increase of 440 basis points compared to a year ago.
Key Data Points
Is 3M stock a buy?
Brown said in a statement these results were only the beginning, saying, "I am focused on ... driving sustained organic revenue growth, increasing operational performance, and effectively deploying capital." The company also raised the lower end of its full-year earnings guidance by $0.20 per share, to a new range of $7 to $7.30 per share.
Even with Friday's surge 3M is still down over the past five years and is losing to the S&P 500 by about 100 percentage points during that period. Though perhaps best known for consumer products like Scotch tape and Post-It notes, 3M makes a wide range of products that are integral parts of industrial, energy, and transportation supply chains.
There's reason to believe the momentum can continue from here.
