Strong industrial orders helped 3M Co. in the fourth quarter, but a tepid holiday shopping season undercut financial results.
The Maplewood conglomerate said profits met analyst expectations while revenue missed the mark. Chief Financial Officer David Meline told analysts that the 2013 holiday season proved “OK but not strong.” Lackluster consumer demand affected retailers and their suppliers countrywide, he said.
But executives remained broadly pleased with the quarter and noted that product sales were particularly strong in its industrial business, where factory, automotive and airplane adhesives sold well, as did filtration products. 3M also benefited from its 2013 acquisition of Ceradyne, a maker of industrial-grade ceramics.
“The fourth quarter was a very strong finish to a very successful year for 3M,” CEO Inge Thulin told analysts during a conference call. “In 2013, we achieved good growth and solid profitability. More importantly we came out of 2013 stronger than we entered it. … We had a very good second part of the year and we feel good about that.”
Sales rose in three of 3M’s five main businesses — industrial, health care and safety/graphic — and fell in the consumer and electronics units.
Analysts said 3M’s modest shortfalls in consumer and electronics were probably what caused 3M to miss analysts’ revenue expectations for the quarter.
Results were surprisingly positive in western Europe, where automotive and manufacturing product orders spiked. Officials are now forecasting up to 3 percent growth for Europe, compared to no growth a year ago.
“Europe flipped from a head wind to now a tail wind. That was the second-best organic growth region behind the United States [for 3M],” said Edward Jones equity analyst Matt Arnold.
3M’s growth in Latin America slowed during the fourth quarter mainly due to political, economic or mining issues in Venezuela, Argentina and Brazil.
Goldman Sachs analyst Joe Ritchie noted that 3M showed a solid “organic growth trajectory.”
The small dip in consumer and electronics didn’t bother some analysts.
Matt Arnold at Edward Jones noted that 3M, which makes optical or screen-brightening films for cellphones, tablets and computers, has seen a shift from laptops to smaller cellphones and tablets. As a result, less optical film is needed. In addition, demand growth for cellphones is starting to level out, which is also impacting 3M. “Electronics is a challenging end market,” Arnold said. “But it’s nothing new.”
3M sales grew 2.5 percent to $7.6 billion during the quarter, off slightly from the $7.7 billion analysts had expected on average. Earnings, however met expectations, rising 11 percent to $1.1 billion, or $1.62 per share.
Full-year sales grew 3.2 percent to $30.9 billion, which was just shy of the $31 billion analysts expected. The company earned $4.66 billion, or $6.72 per share, for the full year.
3M officials reaffirmed their 2014 guidance, saying full-year earnings should reach $7.30 to $7.55 a share and that sales should grow 3 percent to 6 percent.