3M, the diversified manufacturer and Dow component, posted a weaker-than-expected quarterly profit and said global economic growth was slowing slightly.
The maker of such products as Scotch tape, Post-It notes, Thinsulate insulation and a host of other goods also forecast a 2007 profit below analysts' expectations. Shares of 3M fell.
Because of its diverse portfolio of products, 3M is seen as an economic bellwether. Chairman and Chief Executive George W. Buckley said Tuesday there appears to be "slightly moderating economic growth worldwide."
3M's fourth quarter net income rose 58% to $1.2 billion, or $1.57 a share, up from $746 million, or 97 cents a share, a year earlier. Excluding a gain of 47 cents a share largely from the sale of its branded drug business, the company earned $1.10 a share. That's 4 cents below what analysts polled by Thomson Financial expected.
In October, the company had forecast a fourth-quarter profit, excluding one-time items, of $1.10 to $1.16 a share.
Sales rose 8.6% to $5.78 billion, topping the $5.76 billion analysts had forecast.
Sales in local currencies grew 5.8%, with U.S. demand hurt by the significant housing slowdown. It had previously forecast growth of 4% to 8%.
Overall volume growth in the quarter was 6.8%, with growth in ongoing businesses at 4.9%. However, pricing fell 1%, dragged down by declines overseas.
Meanwhile, the slowing housing market hurt 3M during the fourth quarter in businesses such as granules for shingles.
"The shingle manufacturers completely missed their forecasts in the fourth quarter," said Chief Financial Officer Patrick Campbell on a conference call with analysts. "As a result, we went from producing all-out and incurring premium costs to meet excess demand early in the year to being virtually shut down in Q4."
Sales in that business dropped by almost half compared to the same quarter last year, he said.
Looking Ahead
For 2007, 3M predicts earnings of $5.20 to $5.45 a share, including a net gain of 60 cents to 70 cents a share for the sale of its pharmaceutical unit in Europe and 21 cents a share for accounting for stock options. Excluding one-time items, 3M expects to earn $4.60 to $4.75 a share, below the $5 analysts were expecting.
It expects full-year local-currency sales growth, adjusted for the divestiture of the branded drug business, of 6% to 10%. That includes about 1.5 percentage points for acquisitions. Including the drug sales in 2006, it expects sales growth this year of 2% to 6%.
Another diversified manufacturer, Illinois Tool Works, had previously cut its outlook and Tuesday pointed to moderating demand and even declines in some of its North American markets, specifically citing the housing sector and production by the Big 3 domestic automakers.