3M Co., the Rodney Dangerfield of the Dow Jones Industrial Average, just can’t get any respect.
After a record revenue and earnings report for the third quarter and four quarters in a row of above-market growth, investors and traders drove the stock (NYSE:MMM) down $5.30, or 5.8 percent, to close at $85.07 Thursday. More than 16 million shares traded, nearly five times the average daily volume.
Comments by CEO George Buckley about slowing momentum going forward and a downbeat assessment of the U.S. and European economies overwhelmed the good news and contributed to a slide in the DJIA, according to market reports.
In a conference call with analysts and investors, the company lowered its outlook on Q4 earnings per share by 6 cents because of dilution from issuing shares for recent acquisitions. In addition, management provided a preliminary look at next year, projecting 11 percent revenue growth, down from 17 percent growth year-to-date in 2010. The company has scheduled a meeting with analysts Dec. 7 to discuss its 2011 outlook in detail.
In the call with analysts, Buckley described the outlook for the United States, and most of Western Europe as “uninspiring.” That also caught the market’s attention because 3M is viewed as an economic bellwether, given its broad geographic exposure and product mix.
Buckley attempted to soften the blow by saying, “The good news is we see no signs of any broad-based double dip. If it does come, we believe it will be limited in geography, short in duration and relatively mild.”
By contrast, he was decidedly bullish on emerging markets, which make up more than a third of company revenue and grew 25 percent in the recent quarter. Sales grew by 48 percent in Korea, 39 percent in India, 32 percent in Russia, 31 percent in the China/Hong Kong region and 25 percent in Brazil.
“The practical reality is companies with a broad footprint in emerging markets will prosper as long as they remain able to compete with small and fast-growing local competitors,” he said.
The company reported record third-quarter earnings of $1.53 per share on sales of $6.9 billion, growing 11 percent over third-quarter 2009 revenue. Total company operating margins were 22.9 percent and topped 20 percent in all six of the company’s business segments for the third consecutive quarter.
The company saw double-digit sales growth in four of its six business segments in the quarter, led by Electro and Communications at 25 percent and Display and Graphics at 19 percent. Revenue rose 28 percent in Asia Pacific, 14 percent in Latin America/Canada and 6 percent in the United States while Europe declined 1 percent because of currency effects.
The Maplewood-based conglomerate has announced 10 acquisitions this year that they said will contribute about 2 points to its growth in 2011.
When asked why the stock has not performed better following four quarters of above-market growth, Buckley acknowledged: “Maybe we’re not quite the getting full credit for it yet. This is no time to be impatient … I have every confidence it will come in due course.”