3M Company (MMM) stock traded up more than 4% Thursday after the company reported earnings before the opening bell. That move higher puts MMM stock in positive for the past 12-months, outpacing the S&P 500 by almost 2%.
But Thursday’s move higher comes after MMM delivered better-than-expected earnings per share thanks mostly its decline in outstanding shares, as the company’s net income fell from $1.3 billion in the year-ago period to $1.29 billion. Net sales were also down 5.2%.
So why the spike in interest on MMM stock? Let’s find out.
Rundown on MMM Earnings
Wall Street was expecting revenue of $7.9 billion and earnings per share of $2.01. 3M earnings actually came in at $7.71 billion in revenue for the quarter and profit of $2.05 per share.
Organic local currency sales grew only 1.2% during the quarter while currency translation was a 7.4% drag on sales year-on-year. But MMM increased operating income margins by 0.9% year-on-year and was able to return $2.1 billion to shareholders during the quarter: $635 million in the form of dividends and $1.5 billion in share buybacks.
The company also updated it full-year 2015 guidance. MMM management now expects earnings per share to fall within a range from $7.73 to $7.78, compared to a previous range of $7.73 to $7.93. 3M also believes that organic local-currency sales growth will be within a range from 1.5% to 2%, which is lower than the previous guidance of 2.5% to 4%.
As a whole, MMM earnings looked good; financially the company is still very healthy and management is attempting to do all it can to manage the slow growth environment. Which is also why MMM announced it would be cutting 1,500 positions worldwide in a restructuring plan aimed to reduce costs by $130 million in pre-tax savings during 2016.
MMM anticipates a pre-tax charge of $100 million, 13 cents per share, during the last quarter of 2015 due to the reduction plan. Most of the cuts will be in the U.S. with others in slower growing markets around the world, and will be mainly focused on structural overhead positions.
Bottom Line on MMM Stock
Moving forward, investors shouldn’t expect MMM stock to shoot to the moon, but it will help long-term investors get rich slowly. MMM stock currently pays a 2.62% dividend yield, which I must admit is not a massive amount, but MMM has been increasing its dividend amount each year since 1959, making it a distinguished member of the Dividend Aristocrat group.
Now I know what you are thinking, dividend stocks are boring; but before you hit the snooze button, MMM shares have trounced the S&P 500 over the last two-, five- and 10-year periods.
And while MMM faces serious currency headwinds around the world (since it operates in 70 different countries), as investors we should be seeing the pros in that problem. Yes, world economic activity is slowing, but just because the economy is struggling doesn’t mean you are going to use less tape or glue. The reason MMM has been able to increase its dividend each year since 1959 is because its products aren’t really affected by the health of the economy.
If you are looking for a financially healthy and reliable, but slowly growing investment, MMM stock should be at the top of you buy list.
As of this writing, Matt Thalman did not have a position in any company mentioned above. Follow him on Twitter at @mthalman5513.
