3M Recovers on Back of Strong Economy
Recent earnings solid, but firm is vulnerable to cyclical downturns.
Recent earnings solid, but firm is vulnerable to cyclical downturns.
Diversified conglomerate 3M (MMM) reported a generally strong quarter Wednesday, continuing its recovery from a disastrous 1998. If the world economy slows, however, 3M will again suffer.
3M's second-quarter net earnings came in at $1.18 a share, up 15% from a year ago (excluding a one-time gain last year from asset sales) and $0.02 above consensus expectations. Sales increased 9%, driven mainly by 15% growth overseas, where 3M gets more than half its revenues. These healthy results indicate that 3M is recovering nicely from the bad stumble it took two years ago when economies in Asia and many emerging markets collapsed. The company said Wednesday that it expects earnings to recover throughout this year and into 2001.
One way 3M is trying to maintain its growth is by emphasizing faster-growing products tied to hot industries rather than the industrial products from which it gets most of its sales. Recent acquisitions in its Electro and Communications division, which makes components for electronics and telecommunication firms, have increased 3M's presence in the fiber-optic component market. 3M's fastest-growing product line comprises optical films that make computer, cell-phone, and electronic-organizer displays brighter.
Despite attempts to piggyback on the technology boom, 3M primarily remains an industrial company, and as such, its fortunes are tied to the general economy. While it's encouraging to see 3M recovering so well from its recent troubles, investors should nonetheless tread carefully with this cyclical company.
David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.