3M on the road to recovery?

3M Co. boosted sales in all six of its business segments in the second quarter, but CEO George Buckley, reacting cautiously Thursday, didn't unleash a brass band to celebrate an economic recovery.

"The green shoots are certainly there," Buckley told analysts Thursday as he reported $783 million in net income and 3M blew past analysts' expectations on earnings. But he said it's too early to tell if 3M's good revenue news is a "false dawn" and whether those "green shoots" will turn into "weeds" in an uneven recovery.

Wall Street was less restrained. 3M shares rose 7.36 percent after the company produced $1.12 in earnings per share, far exceeding the 94 cents consensus estimate of analysts. Earnings were down 15.8 percent compared to the 2008 quarter.

But the stock gained $4.76 a share on Thursday, closing at $69.43. The Maplewood-based manufacturer reached a 52-week low on March 6, when its stock fell to $40.87. That weak stock price reflected the struggles the company was facing in the first quarter, which Buckley characterized as 3M's "darkest period" in the recession.

Yet Thursday's close was within about $5 of the company's 52-week high of $74.71 on Sept. 19, before 3M and other manufacturers saw their product sales take a nosedive as the credit crisis morphed into a global recession.

"I'm sure the people inside of 3M are probably trying to tamp down expectations a little bit," said Dave Vang, chairman of the finance department at the University of St. Thomas business college. But by exceeding quarterly expectations, Vang said, "the market takes that as a signal that you're going to hit your long-term goals."

When measured against the second quarter of 2008, 3M's sales fell 15.1 percent to $5.7 billion.

However, David Begleiter, a Deutsche Bank analyst, said the "upside surprise" of higher 3M earnings was "driven by cost control, restructuring savings and sequential sales performance."

During a conference call with analysts, the spotlight shone on how 3M built sales from $5.1 billion in the first quarter to $5.7 billion in the second quarter -- a 12 percent increase.

There was huge demand for 3M's respirator masks, used to combat the H1N1 virus. 3M's optical film, used on products such as flat-screen televisions, also was among products that fueled better performance in the spring quarter.

3M made gains in supplying products for traffic safety systems during the quarter, but sales opportunities varied by geography. Patrick Campbell, chief financial officer, said, "Government stimulus has been a positive factor in parts of Asia, but, thus far, we've not seen substantial stimulus-driven activity in the U.S."

Campbell reported that 3M cut about 900 jobs in the second quarter and accepted early retirement applications from about 700 employees. He said there likely will be more restructuring in the third quarter, but it would be smaller than the job reductions in the first and second quarters.

While buoyed by progress in the second quarter, 3M anticipates a sales decline in the third quarter of 8 to 13 percent compared with a year earlier.

But 3M executives have seen enough encouraging signs in the second quarter to raise their full-year forecasts for sales and earnings.

For all of 2009's organic sales -- excluding revenue from acquisitions -- 3M now anticipates its revenue will decline between 10 and 13 percent. That's in contrast to an earlier forecast of an 11 to 15 percent full-year decline.

3M now forecasts its full-year earnings per share will be between $4.10 and $4.30, up from the $3.90 to $4.30 range it released in April.

Despite the improved outlook, Buckley said it is "too soon to call a recovery." He noted that some companies bought 3M products near the end of the second quarter because they needed to restock inventory.

But he said there's danger of a "flat spot" ahead for 3M late in the third quarter or in the fourth quarter when customers could once again retrench.

He noted a strengthening economy in China, but added "we see no signs of improvement yet in Europe."

Buckley recalled that in April, 3M's models showed the U.S. economy would bottom out between the end of the second quarter and the end of the third quarter of this year. On Thursday, Buckley said, "So far, all the evidence that we see continues to support that view."

Liz Fedor • 612-673-7709