Lately, glimmers of hope that the economy has begun to recover have started popping up more and more. But while 3M (NYSE:MMM) hasn't managed to avoid the effects of the economic recession entirely, the results it announced on Thursday looked pretty impressive to me.
For the quarter, the Minnesota-based company, which makes everything from Scotch tape and Post-it Notes to medical supplies, posted net income of $783 million, or $1.12 per share, compared to $945 million and $1.33 per share during the year-ago period. Backing out special items, the company's EPS came in at $1.20 a share. Analysts, who typically ignore special items in their estimates, had forecast $0.94 per share for the quarter.
Sales also came in weaker than last year, but there were signs that many of the company's six business segments held up reasonably well in the weak economy. The Electro and Communications unit took a big sales hit, as did the Industrial and Transportation segment, especially after accounting for the stronger dollar. At the same time, though, 3M's Health Care unit managed to increase its sales by 2.2% year over year before adjusting for currency translations. Beyond that, both the Consumer and Office segment and the Display and Graphics unit managed to confine their declines to single-digit percentages.
Finding a silver lining
During the conference call following the release, 3M CEO George Buckley emphasized the positives during the quarter, noting that its overall 13% year-over-year fall in sales was a big improvement over the 19.5% sales drop in the first quarter. Moreover, sales improved over 12% sequentially from the previous quarter, and profits were strong in the Health Care and Consumer and Office segments.
Perhaps more importantly, though, 3M certainly isn't alone in facing tough times. United Parcel Service (NYSE:UPS) and Microsoft (NASDAQ:MSFT), both of which reported yesterday, had even weaker quarters than 3M. Even McDonald's (NYSE:MCD) saw its profits decline. My contention from that mix of those companies is that despite some positive housing numbers of late, we likely have a while to go before we see a meaningful economic recovery.
Nevertheless, 3M continues to move along decisively. On Thursday, in addition to its earnings release, the company also announced that it had acquired the ACE product line of bandages and support products from Becton Dickinson (NYSE:BDX). As one not known for dexterity, I suspect I'll end up supplementing 3M's revenues from that segment in the years to come.
In addition to releasing its results, the company favorably narrowed its 2009 profit outlook to between $4.10 and $4.30, from an earlier $3.90 to $4.30. On that basis alone, 3M will stay on my watch list.
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