Looking forward to better times

Halfway through the year-end earnings season, the effects of the Great Recession are clear. Less clear is the strength and immediacy of an economic recovery.

Yet there is some good news. Some large Minnesota companies that reported revenue and earnings declines last year also said they're seeing encouraging signs that sales are picking up. Aided by efforts to control costs, slash inventories, decrease receivables and reduce headcounts, they are now better positioned to capitalize in 2010.

More encouraging is that these positive outlooks are coming from across industry sectors, from manufacturers and retailers to medical devices and food companies.

Examples include 3M Co., Minnesota's largest manufacturer. Sales and earnings at 3M in 2009 were $23.1 billion and $4.52 per share, down 8.5 percent and 7.6 percent respectively. But a strong fourth quarter across all its business segments gave the Maplewood-based company confidence that the recovery would continue in 2010 and beyond.

3M now anticipates 2010 sales of $24.5 billion to $25.5 billion with organic sales volume growth of 5 to 7 percent and 2010 earnings in the range of $4.85 and $5 per share. The company invested $1.3 billion in R&D and $900 million in capital investments, which should have payoffs in 2010.

Target Corp., which released earnings last week, saw earnings per share leap 54 percent in the fourth quarter. With consumers beginning to buy more clothes and items for their homes, the Minneapolis-based retailer is forecasting same-store sales growth of 2 to 4 percent in 2010. Kathee Tesija, the company's merchandising chief, said customer surveys are showing a shift as customers are -- selectively -- starting to come a bit more often and to spend a bit more money in some of the discretionary categories.

That additional spending on discretionary items helped Target differentiate itself and outperform rival Wal-Mart Stores Inc., whose fourth-quarter earnings per share rose 26 percent over the same period last year.

On Feb. 11, CEO Douglas Baker told investors: "While we do not expect a significant rebound in our end markets in 2010, we have seen a clear bottoming. We have moved fully onto offense. ... We are focused on delivering double-digit earnings per share growth in 2010."

Ecolab said it expects 2010 adjusted earnings per share (excluding special gains and charges) to range from $2.17 to $2.25. It also expects organic sales growth (excluding foreign currency exchange and acquisitions) to be in the low to mid single digits.

Toro Co. feels like it's on firmer ground after seeing annual sales drop 19 percent last year to $1.5 billion.

"We are off to a good start, but the majority of the selling season is ahead of us," said John Wright, director of investor relations. Last year Toro, the Bloomington-based manufacturer of lawn and garden products for homeowners and field and turf maintenance equipment and irrigation systems for the commercial/contractor markets, slashed its inventories and worked hard to control its costs. As a result it will be more profitable on about the same level of sales as last year.

On Feb. 18, Toro raised its fiscal 2010 earnings guidance to $2.15 per share, a 24 percent increase over the $1.73 it delivered in 2009.

By year end, Medina-based Polaris reported 2009 sales of $1.6 billion, down 20 percent from record levels in 2008. Earnings were $101 million, down a less severe 14 percent. But the company's efforts to control costs, improve pricing and lower promotions had begun to take hold. Polaris reported record fourth-quarter earnings, and management now predicts a smoother ride in 2010 with overall sales up 1 to 3 percent and net income up 7 to 11 percent over 2009.

Hormel Foods Corp. served up a sizzling first quarter ended in January, with better-than-expected results leading the Austin, Minn., company to raise its full-year guidance on Feb. 18 by about 5 cents per share to the $2.68 to $2.78 per share range. The maker of Spam, Hormel chili and other food products said the company's strong portfolio of branded items will overcome rising materials costs including an anticipated increase in hog prices.

Medical device maker St. Jude Medical Inc. did better than most in 2009 with sales of $4.68 billion, up 7 percent and adjusted earnings per share of $2.43, up 5.6 percent. The Little Canada-based company's guidance for 2010 is even more optimistic, with earnings in the range of $2.71 to $2.76 per share -- a 12 to 14 percent increase over 2009.