3M Earnings Preview: Second Quarter 2009

3M [[MMM]] is scheduled to report their second quarter 2009 results before the market opens on Thursday, July 23. Based on our analysis, we at EarningsPreviews.com are expecting MMM to report slightly better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $5.43 billion and EPS of $.95. This would represent a 20% decline in revenues from last year’s $6.74 billion in the same period. The current analyst consensus estimates calls for revenues of $5.41 billion and EPS of $0.94.


3M’s business performance has continued to deteriorate in the face of the current global recession. Last quarter, 3M disappointed Wall Street’s low estimates with a 21% decline in sales (the Street was expecting only an 18% decline). We believe the operating environment improved somewhat in the second quarter and are anticipating only a 20% decline in sales this quarter.


While the economic environment has shown some signs of improvement, 3M still faces significant challenges ahead. However, the company has a tremendous track record outperforming the broader market and Wall Street analysts believe that the company can grow earnings by 9% in 2010.


Share Performance

Since the beginning of the year, 3M’s shares have gained over 9%. In 2008, MMM’s shares fell 32% which was basically inline with the 34% decline in the Dow Jones industrial average.



Shares are now trading at 15x consensus 2010 EPS estimates. This is inline withthe relative valuations of their peer group. 3M’s shares appear to be fully valued right now and we are still not confident that the company will be able to achieve Wall Street’s earnings targets for 2010.


Recommendation: Hold with a $60 price target.


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