3M‘s (NYSE:MMM) second quarter sales and earnings grew at a moderate rate of around 3% year-over-year. The company’s organic sales, which exclude the impact from acquisitions/divestitures and currency translation, grew by 2.3% annually in the second quarter – at the lower end of 2% to 5% organic sales growth guidance provided by 3M.  Sales growth in the quarter was impacted primarily from weakness in consumer electronics and renewable energy markets. In addition, less than a percentage of organic growth in sales from the U.S. – which constitutes a third of 3M’s total sales – also contributed to temper the growth in top line.
On the bright side, the company’s sales from the developing regions especially Latin America continued to grow at strong rates. Looking ahead, 3M expressed confidence in the recovery of consumer electronics markets in the second-half, and accordingly, reaffirmed its outlook for 2013. 3M expects its 2013 earnings to lie in the range of $6.60-6.85 per share with organic local-currency sales growth of 2-5% y-o-y.  In 2012, the company’s earnings were $6.32 per share. 
Separately, 3M raised its share repurchase guidance aimed at utilizing excess cash driven by absence of any acquisitions in recent months. The company will now repurchase shares worth $3.5-4.5 billion in 2013, up from $2-3 billion worth of share repurchases it planned for earlier. 
We currently have a stock price estimate of $115 for 3M, approximately in line with its current market price.
Latin America And Healthcare Markets Drive Growth
3M’s second quarter growth was driven by the developing regions, particularly Latin America. The maker of Scotch tapes, Post-it notes and Nexcare bandages saw its organic local-currency sales from Latin America rise by 8.5% annually in the second quarter, followed by 2.2% y-o-y growth from Asia-Pacific, 1.9% y-o-y growth from Europe, the Middle-East and Africa (EMEA) and 0.8% y-o-y growth from the U.S.. 
Additionally, 3M’s sales from the developing regions was driven by the health care sector. The company’s second quarter heath care sales from both Latin America and Asia-Pacific rose in double-digits driven by the rising income levels in these parts. 3M sells medical and surgical supplies, skin infection prevention products, dental products and health information systems in the health care sector. Going forward, we anticipate 3M’s healthcare sales from these regions to continue to grow at strong rates, as there still exists a significant gap between income levels of people from developing and developed regions.
Apart from healthcare, 3M’s sales from three out of its remaining four segments that include industrial, safety & graphics and consumer also increased in the second quarter. Sales at the fourth segment – electronics and energy – declined due to softness in consumer electronics and renewable energy markets. 3M sells optical films and other parts to the consumer electronics industry that are used in the manufacture of notebooks, tablets, monitors and smartphones.Notes: