3M reported second-quarter 2018 results.
- Sales of $8.4 billion, up 7.4 percent year-on-year
- Organic local-currency sales growth of 5.6 percent; growth in all business groups and all geographic areas
- GAAP EPS of $3.07 vs. $2.58 last year, up 19 percent year-on-year
- Q2 2018 earnings includes a $0.48 per share benefit from divestiture gain, net of related restructuring actions
- Q2 2017 earnings included a $0.33 per share benefit from divestiture gain, partially offset by portfolio and footprint investments
- Returned $2.4 billion to shareholders via dividends and gross share repurchases
- Updated 2018 earnings guidance to reflect full-year impact from the recently completed divestiture of the communication markets business, which was not included in prior guidance
Sales were up 7.4 percent to $8.4 billion. Organic local-currency sales increased 5.6 percent while acquisitions, net of divestitures, increased sales by 0.8 percent. Foreign currency translation increased sales by 1.0 percent year-on-year.
Total sales grew 15.8 percent in Safety and Graphics, 6.8 percent in Industrial, 4.9 percent in Health Care, 4.6 percent in Consumer, and 3.6 percent in Electronics and Energy. Organic local-currency sales increased 8.5 percent in Safety and Graphics, 5.7 percent in Industrial, 5.2 percent in Electronics and Energy, 4.3 percent in Consumer, and 3.8 percent in Health Care.
On a geographic basis, total sales grew 9.5 percent in EMEA (Europe, Middle East and Africa), 7.9 percent in Asia Pacific, 7.1 percent in the U.S., and 3.1 percent in Latin America/Canada. Organic local-currency sales increased 6.0 percent in Latin America/Canada, 5.8 percent in EMEA, 5.6 percent in the U.S, and 5.5 percent in Asia Pacific.
Second-quarter GAAP earnings were $3.07 per share, an increase of 19 percent versus the second quarter of 2017. During the quarter, the company recorded a benefit of $0.48 per share related to the divestiture of the communication markets business, net of related restructuring actions. Second-quarter 2017 GAAP earnings were $2.58 per share which included a net benefit of $0.33 per share from the identity management business divestiture gain, partially offset by portfolio and footprint investments.
Second-quarter operating income was $2.4 billion with operating margins of 28.6 percent. Operating income includes a benefit of $389 million from the communication markets business divestiture, net of related restructuring actions.
The company paid $802 million in cash dividends to shareholders and repurchased $1.6 billion of its own shares during the quarter.
3M updated its 2018 GAAP earnings expectations to reflect the full-year impact from the communication markets business divestiture and related actions. The company now expects its GAAP earnings to be in the range of $9.08 to $9.38 per share versus $8.68 to $9.03 previously. Excluding the full-year impacts from the communication markets business divestiture gain and related actions, a first-quarter legal settlement, and the Tax Cuts and Jobs Act-related expense, 3M now expects its adjusted 2018 earnings to be in the range of $10.20 to $10.45 per share versus prior expectation of $10.20 to $10.55. The update to the range reflects the impact of the divested income associated with the communication markets business which was not included in prior guidance.
The company maintained its full-year organic local-currency sales growth guidance of 3 to 4 percent and free cash flow conversion of 90 to 100 percent, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.