It was all too familiar among companies in the manufacturing sector on Friday: solid (if perhaps unspectacular) results, followed by a hammering by the market.
That was certainly the way it was for 3M
For the quarter, 3M checked in with net income of $960 million, or $1.32 per share, compared to $894 million, or $1.18 a share, in the third quarter of 2006. If you back out a one-time item, the company earned $1.29 a share, a couple of pennies higher than the dart throwers apparently had been expecting. Sales were up 5.5%, but they rose 9.4% without the effect of businesses that have now been divested.
Sales for 3M's operating sectors were anywhere from 2% higher (display and graphics) to up 21% (health care, allowing for the divestiture of the branded pharmaceuticals business). But unlike some other companies that have rolled out their September results, including the world's leading equipment manufacturer, Caterpillar
In fact, the only real concern about the company appears to involve impending cuts to LCD film prices. But according to CEO George Buckley, costs in the group can be cut, and longer-term margins could be higher than the company average.
In the shorter term, it's the same with 3M's loose comparable DuPont
So what we appear to have here is a company with an impressive 40% return on equity, strong free cash flow, a solid balance sheet, and a dividend yield of 2.2%. And every bit as important as these metrics is an apparent continuation of optimism on the part of its executive management. That's a welcome combination in a time of gyrating market conditions and a slowing economy. It makes me want to keep an especially close eye on 3M.
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