3M Co. (MMM), the manufacturer of products including Scotch tape and dental braces, reduced its full-year forecast as a recession in Europe and slowing Asia growth crimped sales. The shares fell the most in almost a year.
3M now sees earnings of $6.27 to $6.35 a share, including 3 cents of an acquisition-related cost, the company said in a statement. That’s down from a previous target of $6.35 to $6.50, which didn’t include the expense, and lower than the $6.40 average of analysts’ estimates complied by Bloomberg.
The St. Paul, Minnesota-based company, which makes a majority of revenue in Europe and Asia, cut the profit target and the top end of its goal for sales from existing businesses to reflect what it called “current economic realities.” Facing slowing demand, Chief Executive Officer Inge Thulin has raised prices and kept costs in check to boost profit.
“Pricing power is evident, but weakening demand across end markets should continue to be of concern as the company re- calibrates growth investment,” Steve Winoker, an analyst with Sanford C. Bernstein & Co. in New York, wrote in a note.
The shares fell 4.1 percent to $88.73 at the close in New York, the biggest intraday drop since Oct. 25, 2011. The stock has gained 8.6 percent this year, trailing the Standard & Poor’s 500 Index’s gain of 12 percent.
During the third quarter, sales fell 6 percent in Europe, the Middle East and Africa and dropped 1.4 percent in Asia Pacific, the company said. Total sales declined 0.5 percent to $7.5 billion, missing the average analysts’ prediction of $7.63 billion.
“We still face the challenge of sluggish economies in large developed regions like Western Europe and Japan,” Thulin said on a conference call with analysts. “In China, the year clearly has not played out the way most anticipated.”
Net income rose 6.7 percent $1.16 billion, or $1.65 a share, from $1.09 billion, or $1.52, a year earlier. That matched the average analysts’ estimate.
Last quarter, selling prices rose 1.1 percent and raw- material costs fell 2 percent, helping boost profit. Currency translations caused a drop of 0.5 percent in revenue at the industrial and transportation unit, the largest.
The display and graphics division posted its first year-on- year sales increase since the second quarter of 2011 after struggling from declining demand for optical film for liquid- crystal-display televisions. Revenue increased 0.1 percent to $936 million.
Foreign exchanges will reduce total sales by about 2.5 percent this year, the company said today, a smaller impact than the 3 percent it expected in July. Sales from existing businesses will rise as much as 2.5 percent this year, 3M said. The manufacturer had forecast a top range of 5 percent in July.
Thulin, who became CEO in February, has created new business areas this year in aerospace and mining, oil and gas to help fuel growth. He announced earlier this month a reorganization of the company that reduced the number of units to five from six and shuffled the leaders of those businesses. Those changes will take effect in January.
During the quarter, the company completed the $110 million purchase of the electronic toll collection and parking management business from Federal Signal Corp. (FSS) 3M also announced on Oct. 1 it agreed to pay $860 million for the shares of Ceradyne, a producer of ceramics used in energy, aerospace and defense industries.
Two days later the company said it abandoned a $550 million deal to buy the office products business of Avery Dennison Corp. (AVY) after failing to reach an agreement with the Department of Justice, which said the combination would hurt competition.
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