Slow and steady wins the race, and investors in 3M (MMM 3.91%) have come to expect slow-moving results in recent years. The fourth quarter of 2012 was no different.
Overall, sales rose 4.2% from a year ago to $7.4 billion and net income rose 3.8% to $991 million, or $1.41 per share. Sales were slightly ahead of estimates but earnings were exactly in line, which is why we don't see much movement of the stock today.
Like last quarter, a foreign currency drag has hit 3M in the fourth quarter, pulling 1% out of sales growth. But, when acquisitions and FX impact are taken out of the equation, organic growth was 4.3%, which isn't all that bad.
There were some really big bright spots as well. The consumer and office unit grew 7.7% from a year ago, and the display and graphics segment grew 10.6%, helped by 3.2% in acquisition growth. These are now the third- and fourth- largest businesses at 3M, so this is really what drove results this quarter.
On the downside, safety, security, and protection actually saw negative 2.5% sales growth, and electro and communications only grew 1% from a year ago. These are the smallest businesses in the portfolio but they still have a significant drag on results.
Renewed focus on R&D
If 3M is going to goose revenue the company is going to have to focus on R&D, which it appears to be doing. R&D spending was up 10.2% year over year to 5.7% of sales. This investment won't pay off for a few years, but if 3M is going to return to high-single digit or even double-digit growth, this is how it will happen.
Of course, in the near term, R&D spending puts pressure on net income, so a 4.2% jump in sales only resulted in a 3.8% rise in net income. But investors should be happy with the payoff long term.
Industrials steady but unimpressive
3M's results were in line with what we saw from conglomerates General Electric (GE 5.67%) and DuPont (DD +0.00%). GE had fairly pedestrian results last week and while aerospace and health care are doing well, it was really the company's finance arm that got investors excited.
DuPont's revenue was flat from a year ago -- earnings actually fell 70% -- but expectations were so low that the stock jumped on the news.
3M hasn't gone through the same wild moves as GE in the long term or DuPont in the short term, but it continued its slow but steady industrial results. 3M will be a dividend stock until R&D can spark growth; the good news is that the dividend is up 4 cents from a year ago to 59 cents per share. Not bad in a slow-moving economy.
