3M Co., the maker of products ranging from Scotch tape to dental braces, cut its annual earnings forecast after quarterly profit trailed estimates for the first time in 1 1/2 years amid a slowing global economy.
The shares fell the most in six months after St. Paul, Minnesota-based 3M said profit will be $6.60 to $6.85 a share, down from a range of $6.70 to $6.95. Analysts predicted $6.83 on average. Currency translation will reduce 2013 sales by about 1.5 percent, the company said.
3M, an economic bellwether with sales in industries as diverse as health care, electronics and auto parts, faced a “low-growth economic environment” in the first quarter, Chairman and Chief Executive Officer Inge G. Thulin said. The company made 65 percent of 2012 revenue outside the U.S. and gets fewer dollars when converting sales from countries with weaker currencies.
“This is 3M’s first miss-and-lower in some time but can be understood in light of the lackluster demand environment,” Steve Winoker, a New York-based analyst with Sanford C. Bernstein & Co. who rates the stock market perform, said in a note. “Currency was a significant drag.”
3M dropped 2.8 percent, the most since Oct. 23, to $104.88 at the close in New York. Even after the decline, the stock has gained 13 percent this year, outperforming the 11 percent gain in the Standard & Poor’s 500 Index.
In 2012, Asia Pacific accounted for 30 percent of sales and Europe, the Middle East and Africa for 23 percent. The euro has weakened 1.4 percent and the yen has slid 13 percent against the dollar this year through yesterday, according data compiled by Bloomberg.
Profit last quarter missed analysts’ estimates for the first time since the third quarter of 2011. Net income was little changed at $1.13 billion, or $1.61 a share, trailing the average prediction by 4 cents. Sales rose 2 percent to $7.63 billion, below the average forecast of $7.81 billion. They fell 0.5 percent in Asia Pacific because of lower prices and currency impact, especially from the yen, 3M said. Revenue from the Europe region was unchanged as acquisitions made up for a 1.1 percent decline in volume.
The company’s electronics and energy unit was the largest drag on earnings, with sales declining 3.3 percent and operating profit falling 16 percent to $196 million.
“Industrial missed my numbers because European short-cycle is weak,” said Brian Langenberg, principal and director of research at Chicago-based Langenberg & Co., in a telephone interview. “In Asia, telecom and electronics were weak as well.” Langenberg has a hold rating on the stock.