3M’s Results Support $97 Stock Value

3M (NYSE:MMM) first quarter earnings were very similar to the earnings it posted in the last quarter of 2011. While the company’s Industrial and Transportation, Healthcare, Consumer & Office and Safety Security & Protection Services divisions continued to grow, albeit at a slower pace, the Electronics and Display businesses continued to struggle.

The company competes with other industrial conglomerates like Dupont (NYSE:DD) and Avery Dennison (NYSE:AVY). We currently have a price estimate of $97 for 3M’s stock, which is around 11% above the current market price.

See our full analysis for 3M here

Industrial and Transportation division drives growth

Sales of the Industrial and Transportation division grew at 8.6%, reaching $2.1 billion. A major portion of this growth was due to acquisitions, which accounted for nearly 3.1% of this growth.

The company’s broad-based sales growth was led by double digit growth in aerospace, abrasives and automotive OEM. The sales growth was positive in all geographic regions and U.S. led with a double digit growth.

The operating income of the division grew by 16.2% to about $600 million as the operating margins expanded by 1.4% to ~22.5%. The company’s impressive business wins in this sector include a a contract with a South American oil & gas company to provide water filtration on their offshore platforms, a collaborative agreement with Chesapeake Energy to design, manufacture and market a broad portfolio of compressed natural gas (CNG) tanks for all sectors of the U.S. transportation market and a acoustic solutions that improves cabin comfort and decrease road noise and has helped 3M increase its share in the automotive OEM.

Continued weakness in Electronics & Communications and Display & Graphics businesses

The weak consumer sentiment in the electronics market kept hurting 3M’s electronics & communication and display & graphics businesses whose sales declined by 3.4% and 11.8% respectively. The decline in the display and graphics business was primarily due to lower film volumes for LCD TVs and decline in the sales of traffic safety systems.

While the decline in Europe was primarily due to weak macroeconomic fundamentals, the drop in Asia Pacific was largely electronics related. Electronics and Communications division was pulled down by lower sales in telecom and consumer electronics related products. The pain for 3M in these segments looks far from over as the weakness in electronics markets is expected to persist at least till the middle of 2012. The company will need to innovate its way out of this trouble as soon as possible.

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