If beating expectations is the glue that will hold the recent market gains, 3M (NYSE:MMM) is doing its part.

The diversified conglomerate behind household names Post-It Notes and Scotch tape, among others, bucked yesterday's pullback with a healthy 5% gain. The company's second quarter and increased guidance for full year 2003 were so well-received that a buy-order imbalance delayed the stock's opening on the New York Stock Exchange.

But peel back the tape and something doesn't quite stick. The company posted a 10% gain in overall sales for the June period, but that's just the middle of a very large seesaw. Domestic sales were up a mere 2% while the international side grew by a more impressive 17%.

The reason for the disparity should be reason for concern: A weak U.S. dollar boosted 3M's sales and earnings overseas. Indeed, half of the growth outside the U.S. can be attributed directly to the faltering greenback. As one can imagine, as the dollar falls, 3M is able to generate favorable currency translations and better margins on its exports. Would the company be raising its 2003 profit target to a range between $5.75 and $5.90 a share if the dollar were stable? Of course not.

Let's applaud 3M for being one of the few global players to take advantage of buoyant international denominations rather than blame the SARS outbreak for any global shortfall. But let's not dismiss the lessons of gravity. Scribble it on a Post-It Note and stick it on your computer monitor if you must, but remind yourself to keep an eye on the dollar. The same buck that propped the company's results can eventually hurt the bottom line by getting stronger. In a world where currency values are never stagnant, the buck doesn't stop here.

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