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(MMM) - Get Report

continued its consistent performance as it delivered another quarter of steady growth driven by strength in the Americas region. This growth was broad-based as four out of the company's six divisions recorded solid growth. 3M competes with other industrial conglomerates like


(DD) - Get Report


Avery Dennison

(AVY) - Get Report


The company's revenues for the fourth quarter of 2011 stood at $7.1 billion, up 5.7% compared to the prior year. This sales increase was driven primarily by acquisitions (+2.3%), with some organic volume growth (+1.3%). While 3M's gross margins shrunk for the fifth consecutive quarter to 46.5%, its net income increased to $954 million. The fastest region of growth for the company was Latin America/Canada where it recorded a 10% growth in sales while in the U.S. it recorded a strong 7% increase.

With the cooling of the Chinese economy and weakness in the consumer market, growth in Asia fell considerably from previous quarters to about 3%. The surprise has been Europe where, in spite of macroeconomic conditions and softness in Western European demand, the company was able to register 4% growth. The company's operating margins decreased by 0.2 percentage points to 19.2% from the prior year mainly on account of higher pension costs. To contain these pension costs, the company has put a freeze on hiring in developing countries.

See our complete analysis for 3M.

Industrial and Transportation

The Industrial and Transportation division was the company's fastest growing segment in the fourth quarter, as sales increased 14.3% from the prior year to $2.4 billion. The division saw double digit growth in abrasives, aerospace, industrial adhesives & tapes, energy & advanced materials and auto OEM, while operating income of $472 million was up 14% from the prior year. Sales increased by 17% in Asia Pacific, 15% in the U.S. and 12% in Europe.

The company also won some new business which holds strong promise for future periods. 3M won major contracts from auto majors for catalytic converters and cabin noise reductions while 30% of its growth in tapes and adhesives came from new applications in medical devices, specialty vehicles and construction markets. 3M is also partnering with a systems integrator to deploy the world's largest solar collector in the Mojave Desert region.

Safety Security and Protection Services

The company's Safety, Security and Protection segment recorded sales of $927 million, up 14% from the previous year. While sales growth was in double digits for security systems and personal safety, it was in single digits for building and commercial services. The only weak spot was roofing granules, where sales were down due to channel inventory reductions.

Sales were up by 18% in the U.S., 17% in Latin America/Canada and 13% in Asia Pacific. The division recorded operating income of $171 million, with an operating margin of 18.5%. While the operating margin decreased by 1 percentage point, the operating income increased by 4%.

Display and Graphics

The Display and Graphics division was the weak spot for 3M, as it recorded sales of $823 million, down 8.8% from the prior year. The sales decrease was largely in traffic systems, as the business was affected by a lack of funding for highway construction. However, there is a positive side as the division's operating margin increased by 3.3 percentage points to 19.2% while operating income increased by 9.7% to $157 million. The company also won some major business in optical films for smartphones and tablets.

We have a Trefis price estimate of $97 for 3M, (link: which is nearly 15% ahead of the current market price. We are in the process of revising our estimates to incorporate Q4 earnings.



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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.