3M Profit Tops Estimates on Health, Auto-Parts Demand

3M Co., the maker of car fuel-system cleaners to dental braces, posted second-quarter profit that beat analysts’ estimates on lower taxes and higher demand for health-care and auto products.

Net income rose 2.6 percent to $1.2 billion, or $1.71 a share, from $1.17 billion, or $1.66, a year earlier, the St. Paul, Minnesota-based company said today in a statement. The average estimate was $1.70, according to data compiled by Bloomberg. 3M said a lower tax rate added 6 cents a share to earnings, and its operating profit margin fell.

The company, which generated only 35 percent of its revenue in the U.S. last year, has found growth in Latin America for health-care products and in its home market for auto goods. 3M has struggled to boost sales and profit amid a recession in Europe and a slowdown in China’s economic expansion.

“This second-quarter report should bolster the perception of 3M as a company that can execute consistently in the current highly variable global economic environment,” Nick Heymann, a New York-based analyst at William Blair & Co., wrote in a note. He has a market perform rating on 3M.

Sales rose 2.9 percent to $7.75 billion, trailing the $7.77 billion average analyst estimate. Revenue fell 3.2 percent in the Electronics and Energy unit, rose 4.6 percent for Health Care and climbed 6.6 percent for Industrial, 3M said.

“We continue to grow our sales, profits and free cash flow in the face of a continued slow-growth economy and a strong U.S. dollar,” Chief Executive Officer Inge Thulin told analysts and investors on a conference call.

Narrower Margin

3M reported a second-quarter operating margin, a measure of income to sales, of 22 percent, down from 22.9 percent a year earlier. That was lower than estimates, Steve Tusa, a JPMorgan & Chase Co. analyst in New York, wrote in a note today. Margins were hurt by exchange rates, especially a weaker yen against the dollar, acquisitions and lower factory utilization, 3M said.

“Sales were in line, with the miss coming from margins,” said Tusa, who rates the stock underweight. The company said currency rates trimmed sales by 1.3 percent from a year earlier.

The shares rose 0.2 percent to $116.55 at the close in New York. 3M has gained 26 percent this year, outpacing the Standard & Poor’s 500 Index’s 19 percent gain.

3M reiterated its 2013 earnings forecast of $6.60 to $6.85 a share, which it reduced in April from $6.70 to $6.95. The company also kept its forecast for organic local-currency sales growth at 2 percent to 5 percent this year. 3M doesn’t provide quarterly outlooks.

‘Moderate Growth’

“By and large, I would call it an in-line quarter,” Matt Arnold, an Edward Jones & Co. analyst in St. Louis who has a buy rating on the stock, said in a telephone interview. “It looks an awful lot like the first quarter with pretty moderate growth across the portfolio.”

The company raised its planned 2013 stock buybacks to a range of $3.5 billion to $4.5 billion, a $1.5 billion increase to both ends of its earlier forecast. Buybacks during the second quarter totaled $1.2 billion, 3M said. The company had reported repurchases of $805 million in the year’s first three months.

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