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3M beats in Q3, delivers gain in free cash flow

Posted Oct 24th 2009 1:20PM by Steven MallasSteven Mallas RSS Feed
Filed under: Earnings reports, 3M Corporation (MMM)

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3M (NYSE: MMM) is one of those solid stocks that investors love to sock away in a core portfolio. It was down when pessimism about the economy was at its peak, but it's coming back now that Wall Street is becoming comfortable with the idea that the economic clouds will eventually give way to rays of macro sunshine.

Earlier in the week, 3M reported a great quarter. No, it wasn't so great on a comparable basis. The company, which counts Johnson & Johnson (NYSE: JNJ) and DuPont (NYSE: DD) as colleagues, suffered a decline of almost 6% on the top line in Q3. Earnings per share on an adjusted basis, which came in at $1.37 per share, were down 3.5%.

Yep, that's not so good. Sequentially, however, 3M experienced an expansion in not only sales and per-share profit, but in operating margin as well.

And let's mention the money the business brought in over the past nine months. Cash from operations was up, and capital expenditures were down. The result? A very attractive increase in free cash flow. This metric also jumped during the third quarter itself.

Oh, and what about expectations and guidance? They're covered, too. According to the Closing Bell piece on Thursday, the market wanted 3M to do only $1.17 per share. And the forecast for the full fiscal year received a raise.

Good job, 3M management. You did well, and you should hopefully do better as time goes on. 3M has successfully retained its reputation as a safe blue-chip equity. It pays a good dividend, and it's got the cash flow to back the payment up. The stock is near a 52-week high, so you could argue that it's already made its move. Then again, this is the type of investment idea you ease into gradually over months, even years. It's not really a trading vehicle for most. Instead, it's an iconic business which should grow steadily in the future.

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: 3M, DD, dividend investing, dividend stocks, dividends, dupont, earnings, JNJ, johnson and johnson, MMM

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Last updated: November 26, 2009: 07:40 AM

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