3M Company (NYSE:MMM) MMM reported solid fourth-quarter 2021 results. Its earnings surpassed estimates by 13.79% and sales exceeded the same by 0.08%. This is the company’s eighth consecutive quarter of earnings beat.
Its adjusted earnings in the reported quarter were $2.31 per share, surpassing the Zacks Consensus Estimate of $2.03. The bottom line decreased 2.9% from the year-ago quarter figure of $2.38.
The results gained from the positive impact of price/raw material (3 cents), shares outstanding (2 cents), lower tax rate (12 cents) and other tailwinds (10 cents). However, organic volume /productivity & other and foreign currency movements had adverse impacts of 33 cents and 4 cents, respectively.
In 2021, the company’s adjusted earnings came in at $10.12, up 14% year over year.
Sales Details
In the quarter under review, 3M’s net sales were $8,612 million, reflecting growth of 0.3% from the year-ago quarter. The company’s net sales also surpassed the Zacks Consensus Estimate of $8,605 million.
Results benefited from a 1.3% year-over-year increase in organic sales, partially offset by an adverse impact of 1% from movements in foreign currencies.
Region-wise, sales in the Americas increased 2.1% year over year while that in the Asia Pacific fell 0.2%. Sales from business in the Europe, Middle East and Africa region declined 4.5% year over year.
The company reports top-line results under four business segments — Safety & Industrial, Transportation & Electronics, Health Care and Consumer. The segmental information is briefly discussed below.
Revenues from Safety and Industrial totaled $3,064 million, decreasing 2.2% year over year. The decline was attributable to a 1.3% decrease in organic sales and a 0.9% negative impact from movements in foreign currencies.
Revenues from Transportation & Electronics totaled $2,306 million, reflecting a year-over-year decrease of 1.5%. The decline was attributable to a 0.4% decrease in organic sales and a 1.1% adverse impact from movements in foreign currencies.
Revenues from Health Care were $2,275 million, up 0.7% year over year. The results benefited from a positive impact of 1.6% from organic sales, partially offset by a 0.9% negative impact from movements in foreign currencies.
Revenues from Consumer increased 4.1% year over year to $1,476 million. Organic sales improved 4.9% but movements in foreign currencies had a negative impact of 0.8%.
In 2021, the company’s net sales were $35,355 million, up 9.9% on a year-over-year basis.
Margin Profile
In the quarter under review, 3M’s cost of sales increased 7.1% year over year to $4,698 million. It represented 54.6% of net sales compared with 51.1% in the year-ago quarter. Selling, general and administrative expenses decreased 3.5% to $1,824 million. It represented 21.2% of net sales compared with 22% in the year-ago quarter. Research, development and related expenses increased 3.9% to $474 million. It represented 5.5% of the quarter’s net sales.
The company’s adjusted operating income in the quarter decreased 12.6% year over year to $1,616 million.
Operating margin decreased 270 basis points to 18.8%. The tax rate in the quarter was 14.5% compared with 18.6% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting 2021, 3M had cash and cash equivalents of $4,564 million, reflecting a decrease from $4,878 million at the end of the last reported quarter. Long-term debt balance decreased 0.8% sequentially to $16,056 million.
In the reported quarter, the company generated net cash of $2,005 million from its operating activities, reflecting a decrease of 20.3% from the year-ago quarter. Capital used for purchasing property, plant and equipment increased 31.8% to $556 million. Adjusted free cash flow in the quarter was $1,479 million, down 29.7% from $2,104 million generated in the year-ago quarter. Adjusted free cash flow conversion was at 110%.
In the quarter, the company used $848 million for paying out dividends to shareholders and repurchased $938 million treasury shares. It paid out dividends of $848 million and refrained from repurchasing shares in the year-ago quarter.
Outlook
For 2022, 3M remains focused on investing in emerging end markets for driving long-term growth. Healthy cash flow generation, efforts to strengthen capital structure and sound capital allocation also remain its priorities.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the industry are discussed below.
ITT (NYSE:ITT) Inc. ITT presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its earnings surprise for the last four quarters was 10.63%, on average.
ITT’s earnings estimates decreased 0.2% for both 2021 (results are awaited) and 2022 in the past 30 days. Its shares have gained 1% in the past three months.
Carlisle Companies (NYSE:CSL) Incorporated CSL (OTC:CSLLY) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 38.89%, on average.
In the past 30 days, Carlisle’s earnings estimates have been stable for 2021 (results are awaited) and increased 0.2% for 2022. CSL’s shares have lost 0.8% in the past three months.
Danaher Corporation (NYSE:DHR) DHR presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 24.05%, on average.
Danaher’s earnings estimates have increased 0.1% for 2021 (results are awaited) and 1.4% for 2022 in the past 30 days. DHR’s shares have lost 9.6% in the past three months.
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