Beat it, missed it, beat it, missed it, beat it ...

For five quarters running, "global, diversified technology company" 3M (NYSE:MMM) has addled investors' brains with its habit of beating earnings estimates one quarter, only to fall short again in the next. Considering that the company's last quarter was one of the good 'uns, the superstitious among us might be forgiven for wondering what tomorrow's news will bring.

What analysts say:

  • Buy, sell, or waffle? Fifteen analysts get 3M's memo. Eight rate it a buy, and seven a hold.
  • Revenues. On average, the analysts expect to see 6% sales growth to $6.05 billion.
  • Earnings. Profits are predicted to rise 12% to $1.18 per share.

What management says:
CEO George Buckley described last quarter's results as an "exceptionally strong start in 2007," in which the firm's health care and security divisions drove growth with year-over-year sales increases of 24% and 19%, respectively. Reviewing the results, my Foolish colleague Ryan Fuhrmann agreed that they were worth cheering about. Personally, though, I found myself a bit annoyed at the hyperactivity of 3M's spin department.

Management announced that sales grew only 6% for the quarter, but quickly added that, "Excluding the impact of divested branded pharmaceuticals business, sales increased nearly 10%." In contrast, 3M touted its earnings per share as rising 58%, and put this figure in its headline, downplaying the fact that this number included "$0.57 net benefit from special items." No attempt was made to explain the percentage-growth in profits absent this one-time benefit. (Fortunately, Ryan did the math for us. The answer: Profits would have grown 14%.)

I don't know about you, but the double standard in describing sales and earnings trends smacked of a company wanting to have its Post-it note and eat it, too.

What management does:
Perhaps most frustrating, though, is that I see no reason why this Motley Fool Inside Value pick should have felt compelled to spin its news. I mean, really -- turning 6% sales growth into 14% growth? To me, that sounds pretty good. But maybe, after reporting four straight quarters of declining rolling gross and operating margins -- which, by the way, still dwarf the numbers of 3M rivals DuPont (NYSE:DD) and Avery Dennison (NYSE:AVY) -- 3M is developing a bit of paranoia, and spinning the facts just out of habit.

Margins

12/05

3/06

6/06

9/06

12/06

3/07

Gross

51.0%

51.1%

50.9%

50.4%

49.7%

49.2%

Operating

23.8%

24.4%

23.6%

23.5%

23.2%

22.7%

Net

14.7%

15.0%

15.3%

15.2%

16.8%

18.6%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Unfortunately, judging from comments made by the team at Inside Value in our February update on the company, 3M may actually feel it's not safe to break that habit just yet. Citing the company's warning of "impending economic weakness," our analysts opined that "3M might see some malaise over the near term," in large part because of anticipated slowing in the growth of the U.S. economy.

Fortunately, however, 3M doesn't just work in the U.S., and our team made a point of citing India and China as "strong points" that could "contribute to top-line growth well ahead of the U.S. GDP."

What are the numbers that back up this conclusion? Take a free, 30-day trial of Inside Value, read our buy report, and find out.

Check out 3M's earnings news of yester-quarter in:

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool's disclosure policy is covered in Post-its.