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3M (MMM - Free 3M Stock Report), a diversified manufacturer and technology company with operations in more than 65 countries, recently reported good first-quarter results. The top line came in at $7.486 billion, 2.4% higher than the year-earlier mark and almost exactly on par with our target of $7.480 billion. Gross profit and operating margins were much wider than we anticipated. Indeed, the companywide EBIT margin was 21.8%, and five of the six businesses reported figures above the 20% mark. Our model was forecasting an EBIT margin of just 19.9% in the March period. As a result, GAAP share earnings were $1.59, a dime better than both the year-earlier tally and our estimate. Adjusted share net, which excludes charges related to one-time retirement and restructuring actions, was $1.63.

Sales increased 8.6% at the Industrial & Transportation segment, thanks to a combination of internal growth and recent acquisitions. Demand from the aerospace, abrasives, and automotive sectors was strong, and revenues were up across all geographies (including a double-digit increase in the United States). Operating income here climbed 16.2%, and the EBIT margin was 22.5%.

Healthcare revenues were up 2.0%, owing largely to the stout advance in information systems sales. 3M notched healthy growth in Asia/Pacific, the United States, Latin America, and Canada. European sales declined markedly, year over year, due to the rough operating climate. Operating income rose 9.0%, to $402 million, and the EBIT margin came in at an impressive 31.4%.

The Consumer & Office group posted a 4.3% top-line advance, including 3.0% from the recent purchase of GPI. European sales grew at a double-digit rate (driven by GPI); domestic sales declined slightly. Operating income here was up 8.8%, to $234 million, so the operating margin inched up to 22.4%.

Sales of Safety, Security & Protection Services offerings rose 5.5%. The strongest growth was notched by the roofing granules and personal safety businesses; revenues declined a bit at the security systems unit. Again, 3M capitalized on favorable environments in North America, while lackluster conditions across the pond led to year-over-year declines in Europe. Still, operating income grew nicely, and the EBIT margin was 23.6%.

Conversely, the Display & Graphics and Electro & Communications groups both struggled to hold their ground in the opening stanza of 2012, due to a slowdown in the global consumer electronics industry. Indeed, revenues were off 11.8% and 3.4%, respectively, owing to lower production levels, decreased LCD TV volumes, etc. Operating income levels fell 29.2% and 5.7%, respectively, and EBIT margins were squeezed to 19.6% at the former and 20.8% at the latter.

Investors applauded the conglomerate's first-quarter performance, and drove MMM shares nicely higher in the minutes following the opening bell. Minus minor setbacks in early March and early April, this Dow-30 component has been steadily rallying since the onset of 2012.

We have also taken notice of the strong results turned in by 3M, and are raising our 2012 and 2013 targets. We have added $0.12 to this year's share-earnings target, which now stands at $6.42. Next year, we expect share net to be in the neighborhood of $7.00. (We have also modestly expanded our top-line calls.)

All told, the story here has not changed much over the years. We continue to view MMM stock as a solid long-term holding. Annual profit growth between now and 2015-2017 should be plenty strong. This, coupled with the above-average dividend yield, translates into good (and well-defined) total-return potential. The blue chip is also a nice fit for conservative portfolios. The company's Financial Strength is A++, thanks to its healthy balance sheet and its ability to generate copious amounts of cash flow. The beta coefficient is 0.80, which means lower volatility, and the Price Stability and Earnings Predictability scores are good. When taking all of this into account, it is easy to see why high-quality MMM stock is ranked 1 (Highest) for Safety.

About the Company:3M, a component of the Dow Jones Industrial Average, is a diversified manufacturer that sells more than 50,000 products in 65 countries. Its six business segments include: Industrial & Transportation (33.5% of 2011 revenues); Healthcare (16.7%); Display & Graphics (12.2%); Consumer & Office (13.8%); Safety, Security & Protection (12.7%); and Electro & Communications (11.0%).

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.