Diversified manufacturer 3M reported a 3 percent rise in quarterly earnings on Thursday, topping the average Wall Street forecast, as strong international demand more than offset a slowing U.S. economy.
Its broad lineup of businesses, which range from high-tech industrial products such as chemicals used in aircraft maintenance to basic consumer goods like Post-it notes, make the company a bellwether of the U.S. economy. But with demand slowing in the United States, which now represents just a third of its revenue, 3M has been relying on growth in emerging markets.
The company, whose products range from Scotch tape to optical films for liquid crystal displays, posted second-quarter profit of $945 million, or $1.33 per share, up from $917 million, or $1.25 per share, a year earlier.
Factoring out one-time items, profit was $1.39 per share. On that basis, analysts had expected $1.35, according to Reuters Estimates.
Revenue came to $6.74 billion, up nearly 10 percent from a year earlier. The weak dollar was responsible for more than half of that growth.
3M's broad lineup of businesses, which range from high-tech industrial products such as chemicals used in aircraft maintenance to basic consumer goods like Post-it notes, make the company a bellwether of the U.S. economy.
But with demand slowing in the United States, which now represents just a third of its revenue, 3M has been relying on growth in emerging markets.
"This quarter validates CEO George Buckley's strategy, which is to have a very strong international presence and to be very diversified not only by products, but also by geography," said John Koczara, portfolio manager at Ames Investment Council, a Grand Rapids, Michigan-based money manager that counts 3M shares among its holdings.
Sales and profit were up across all of the company's segments with the exception of its display and graphics business, which makes optical films used in liquid crystal displays.
That unit, where operating profit tumbled 47 percent, has struggled as TV makers increasingly compete for market share by cutting the price of flat-panel sets.
Consumer Segment Rebound
Operating profit was up 8.4 percent at 3M's consumer and office segment, which makes products ranging from air filters for furnaces to pet-care items and has felt the brunt of softening U.S. consumer spending.
"Just a quarter ago the consumer business went negative, and I don't think I've seen anything out there to suggest to me that things are better in that part of the market," said Daniel Ortwerth, materials analyst at Edward Jones in St. Louis.
"They managed to turn that number positive. That tells me this company has some ability to be flexible, even in bad circumstances."
3M held its full-year earnings forecast steady, calling for an increase of at least 10 percent over last year's $4.98 per share before one-time items.
Analysts' average forecast is $5.46 per share.
St. Paul, Minnesota-based 3M has stopped providing quarterly profit guidance due to high volatility in demand for many of its products.
Its shares are down 16 percent this year, compared with a 12 percent decline in the Dow Jones industrial average, of which it is a component.