QUOTE AND NEWS
DailyFinance  Aug 14  Comment 
Today 3M Library Systems sets the library industry security standard by becoming Payment Application Data Security Standard (PA-DSS) validated for fines and fees collection. The extensive process to become...
Jutia Group  Aug 14  Comment 
[Business Wire] - Today 3M Library Systems sets the library industry security standard by becoming Payment Application Data Security Standard validated for fines and fees collection. Read more on this. 3M Company (MMM), valued at $92.23B, started...
Jutia Group  Aug 12  Comment 
[Business Wire] - 3M will join 11-time Sprint Cup Series champions Hendrick Motorsports beginning with the 2015 NASCAR season when it will become a primary sponsor of driver Jeff Gordon and his No. Read more on this. 3M Company (MMM), valued at...
DailyFinance  Aug 11  Comment 
The Board of Directors of 3M (NYSE: MMM) today declared a dividend on the company’s common stock of 85.5 cents per share for the third quarter of 2014, payable Sept. 12, 2014, to shareholders of record at the close of...
Jutia Group  Aug 11  Comment 
[Business Wire] - 3M announced today the appointment of Sondra Barbour to its Board of Directors. Barbour currently is executive vice president of Lockheed Martin’s Information Systems & Read more on this. 3M Company (MMM), valued at $91.09B,...
TheStreet.com  Aug 11  Comment 
NEW YORK (TheStreet) -- If you're going to invest in a good dividend stock, you want it to have surging cash flows. So consider 3M . 3M -- the maker of the familiar Scotch tape and Post-It notes -- has operations in more than 65 countries. 3M is...
Forbes  Aug 11  Comment 
Consistently, one of the more popular stocks people enter into their stock options watchlist at Stock Options Channel is 3M Co (NYSE: MMM). So this week we highlight one interesting put contract, and one interesting call contract, from the...
SeekingAlpha  Aug 9  Comment 
By Stan Stafford: Overview In this article, I was originally going to list out 3 reasons as to why 3M (NYSE:MMM) remains a buy for long-term investors. However, when researching the stock, I discovered there are a lot more than 3 reasons to...
SeekingAlpha  Aug 6  Comment 
By Michael VanLoon: 3M (NYSE:MMM) is a huge company with many segment lines and huge investments in research and development. For some investors, it may be difficult to tackle such a company. How should an investor examine such a company? Do it...
Market Intelligence Center  Aug 6  Comment 
After closing Tuesday at $139.78, 3M Co (MMM) presents an attractive opportunity to get a 2.68% return in just 164 days, which is an annualized return of 5.96% (for comparison purposes only). To enter this trade, sell one Jan. '15 $135.00 call for...




 


3M is a diversified manufacturer with one of the highest international presences of any multi-industry company. With products such as Post-It Notes and Scotch Tape as well as high-tech LCD films, 3M develops innovative new products while turning a profit off of old favorites. 3M operates in six business segments: Healthcare, Industrial & Transportation, Consumer & Office, Display & Graphics (D&G), Electro & Communications, and Safety, Security & Protection.

3M is becoming increasingly global: 63% of 3M's total revenue comes from outside the United States as of 2009.[1] Its international penetration makes 3M well-positioned to take advantage of growing economies such as those of India, China, and Brazil.

3M has stepped up acquisitions of smaller international companies to spur overseas and portfolio expansion from 2008 to present. The company purchased Aearo Holding Corp, Cogent, and many other firms to enhance its product offering during this time period totaling approximately $1 billion in acquisitions.[2] The company is looking to buy products and brands that are well-known in their domestic markets in order to accelerate penetration of foreign markets. [2]

Company Overview

Business and Financial Metrics

Drop offs in operating and net income in 2009 can primarily be attributed to restructuring actions, exit activities and a loss on sale of businesses.[3]

Business Segments

3M Company had a rocky start in 1902 as "Minnesota Mining and Manufacturing," an almost-failed mining company. In 2002 it changed its name to 3M; today the company is a diversified industrial and consumer products company operating six business segments. 3M sells the majority of its products to retailers or other large distributors; some large companies and hospitals have direct accounts with 3M for their more specialized technologies.

Best known for brands including Scotch tape, Post-It, and Nexcare, 3M makes over 55,000 products ranging from sandpaper and bandages to wide screen LCD TVs. The thread that unifies the majority of 3M’s products is that they are based on applying coatings to backings (e.g., sandpaper). Divisions with key product offerings are listed below:

  • Healthcare (18.6% of sales)[4]: Medical Supplies; Skin Products; Pharmaceuticals (sold in 2007); Drug Delivery Systems; Dental / Orthodontic; Health Information Systems; Microbiology
  • Industrial & Transportation (30.8% sales)[4]: Abrasive Systems; Industrial Adhesives; Personal Care; 3M Dyneon; CUNO; Specialty Materials; HighJump Software; Aerospace; Packaging; Automotive
  • Consumer & Office (15% of sales)[4]: Stationary; Office; Home Care; Protection; Construction; Home Improvement; Visual Systems
  • Display & Graphics(13.5% of sales)[4]: Optics Systems; Commercial Graphics, Traffic Safety Systems; Touch Systems
  • Electro & Communications (9.8% of sales)[4]: Electronics Solutions; Electric Markets; Communications Markets; Electronics Material Markets
  • Safety, Security & Protection (13.8% of sales)[4]: Industrial Minerals; Commercial Care; Security Systems; Building Safety; Corrosion Protection; Occupational health; Environmental Safety

Business Drivers

International v. Domestic Economies

Strength in growing markets overseas

While the North American economy could continue to remain sluggish, it appears that overseas industrial markets continue to shine. This should bode well for 3M, considering that more than 60% of 3M’s revenues are derived from outside of the U.S. Furthermore, should the dollar remain weak, 3M could continue to benefit from it and other exchange rates. Considering that 3M’s products are largely positioned as consumables (e.g., filters, Post-it notes), growing international demand for 3M products should directly correlate with rising disposable income in developing economies over time. To this end, 3M expects annual revenue growth rates of between 15 and 30 percent for China, Russia, India, the Middle East, and Eastern Europe.

This will become increasingly important for 3M's largest international market: Asia. China, Japan and India are three particular markets where 3M has significant opportunity to claim market share due to growing economies and large populations. To target these opportunities, 3M has dedicated $500 million of incremental spending to expand capacity in the next two years in high-margin businesses like Safety, Security & Protection. The company estimates that it could be capacity constrained for up to 20% of its current volumes. 3M is expanding into new production facilities in Poland, Korea, and China.

In January 2010, the company said it expects sales in Central and Eastern Europe to grow over 20% annually for the next five years, with Poland providing the bulk of its regional production. Poland was the only European Union member to survive the global economic downturn without entering a recession. [5]

Domestic slowdown

The 2008 Financial Crisis and associated global downturn has dampened the company's prospects, although the company is recovering well. An estimated 6% of 3M revenue is directly tied to North American consumer habits, especially for the Display & Graphics division, for which a third of sales are domestic and most LCD televisions are screens sold to end consumers. (See Home Entertainment Growth.)[6]

LCD films

3M's proprietary products work to make flat panel display screens brighter by refracting usable light towards the viewer and recycling unusable light back through the display without absorbing light waves. This product is used mainly in notebook PCs and hand-held devices and to a lesser extent in TVs and monitors to make electronic displays more vibrant and thereby allowing a reduction in energy usage for these products by 50-70%.[7]

Growth through acquistions

Historically 3M has focused on organic growth, but recently it has become increasingly interested in acquisitions, especially in emerging markets. In October 2009, 3M CEO George Buckley said that the company intended to make 10-20 acquisitions in varying industries for a total cost of about $1 billion.[8]

One of the major expansion areas for 3M has been the market for LCD screens. The company dominates the global market for brightness enhancement films that are used by the flat panel display (FPD) industry for LCD applications in products such as LCD televisions, notebooks, desktop monitors, cell phones, and handhelds. The monitor market has historically been the largest piece of 3M’s LCD film sales. Its 2005 flat panel display film business breakdown was 60% monitors and TVs, 25% handhelds; and 15% notebooks.

Increasing raw materials prices

Given the specialty chemical content that characterizes many of 3M’s products (i.e., adhesion and abrasion properties), raw materials and their associated prices can significantly influence the company’s margins. In addition to components and compounds, 3M consumes various energy products including natural gas. Fluctuations in the prices of key raw materials –-copper, natural gas, toluene, ethylene, ethane, benzene and polyethylene have the potential to cut into 3M's net income.

Competition & Operational Metrics

Since 3M operates in six different business sectors, it faces various smaller, more specialized companies in singular areas and a few larger companies cross sector, such as Tyco International (TYC). Industry & Transportation, Healthcare, and Display & Graphics, are the three greatest contributors to sales for 3M, so operational metrics for these three sectors should be examined separately.

Since 2004, as 3M experienced increased competition in its Brightness Enhancement Films area, organic growth and margins for the segment have come under more pressure. Its Dual Brightness Enhancement Films technology faces less pressure from competitors, but operating margins may decrease as a result of pressure on LCD screen manufactures to cut costs as the LCD industry becomes highly competitive.



References

  1. MMM 2008 10-K, Item 1A "Risk Factors," page 8
  2. 2.0 2.1 Bloomberg "3M to Spend $1 Billion on Acquisitions Within a Year "
  3. MMM 2008 10-K, Item 7: Management’s Discussion and Analysis of Financial Condition, page 18
  4. 4.0 4.1 4.2 4.3 4.4 4.5 MMM 2009 10-K, Item 7 "Management's Discussion," p. 14
  5. Reuters, "3M sees its CEE revenue growing over 20 pct/yr"
  6. Business Week "3M Climbs as Morgan Stanley Sees Possible Profit Beat"
  7. 3M Q2 2008 Earnings Call.
  8. Bloomberg, "3M to Spend $1 Billion on Acquisitions Within a Year"
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