Although lower, 3M earnings beat expectations; shares gain 5%
Terry Fiedler
Star Tribune
Published Oct 23 2001
3M Company's third-quarter earnings fell 12 percent,
excluding special charges, but the Maplewood-based company
drew praise Monday from the financial community for limiting
the decline with aggressive cost cutting.
Earnings of $437 million, $1.10 a share, excluding special
charges, beat analysts' consensus expectations by a penny.
Investors welcomed the news as 3M shares rose 5.1 percent in
trading Monday to close at $107.39, up $5.22.
Including a $43 million after-tax charge for a previously
announced restructuring plan, 3M's earnings were down 21
percent to 99 cents a share.
"As tough as the economic environment is, I think they
performed very well in the quarter," said Edward Jones analyst
William Fiala. "I think a lot of the credit has to go the new
discipline brought in by [CEO W. James] McNerney [Jr.].
Otherwise, you would have seen earnings down much more
dramatically."
Tom Mahowald, an analyst for American Express Financial
Advisors, said 3M did "a reasonable job given everything
happening in the world."
"The cost reductions were better than what I would have
thought," he said. "I would argue that [McNerney] had a
favorable impact on the company in a rapidly declining
business conditions."
Worldwide sales for 3M, which makes more than 50,000
products in a variety of industrial and consumer markets, were
down 7.1 percent to $3.967 billion from the year-earlier
quarter.
Unit sales fell 4.8 percent and selling prices rose 0.4 percent.
Currency translations reduced sales 2.7 percent.
U.S. sales were down 6.7 percent to $1.919 billion from the
same quarter last year, although the company saw volume
growth in its health care and transportation, graphics and
safety segments.
Among the hardest hit 3M segments was electro and
telecommunications, which experienced a 21 percent drop in
sales and an operating profit margin decline from 18.3 percent
to 8.6 percent.
To offset softening world conditions, 3M reduced sales, general
and administrative expenses nearly $86 million, about 9
percent, over the same quarter last year.
Part of those cost savings came from a previously announced
restructuring plan that included a job cut of 5,000 employees.
Mahowald anticipates more action along those lines.
"I would expect [3M] and every other company to look at
business prospects and to put more on the table in terms of
layoffs," he said.
3M also announced that difficult market conditions were likely
to result in another quarter of earnings decline.
The company projected earnings ranging from 95 cents a share
to $1.05 a share for the fourth quarter, excluding special
charges. 3M earned $1.12 in the fourth quarter 2000, excluding
special charges.
-- Terry Fiedler is at tfiedler@startribune.com . |
