3M Company (MMM - Free 3M Stock Report), a diversified manufacturer and technology company with operations in more than 65 countries, has reported fourth-quarter and full-year 2012 results. Sales rose 4% in the final period, to $7.4 billion, which was slightly more than $200 million ahead of our target and roughly $210 million better than the consensus estimate. Share earnings improved to $1.41, which was also up 4% compared to a year earlier. We were looking for share net to come in at $1.43, while Wall Street analysts, on average, were expecting $1.41. For the full year, 3M Company reported record sales of $29.9 billion, up 1% from the previous high-water mark notched in 2011. Share profits in 2012 were also at a record, coming in at $6.32. This was a year-over-year increase of 6%. All in all, the company rounded off 2012 on a solid note, especially considering the challenging economic conditions and currency translation headwinds.

Switching gears, five of 3M Company's six business groups posted organic (local-currency) revenue advances in the fourth quarter. Four of the conglomerate's six business segments managed to post full-year internal sales growth, led by Health Care up 5% and Industrial & Transportation, also up 5%.

The largest segment, Industrial & Transportation notched sales of $2.5 billion in the fourth quarter, up 4% in U.S. dollars. Internal sales growth increased 4%, led by liquid filtration, aerospace, industrial adhesives and tapes, abrasives, and automotive OEM. The advanced materials and renewable energy units posted year-over-year declines. The acquisition of Ceradyne added 1% to the Industrial & Transportation top line, while currency translation reduced sales by 1%.

The Healthcare group also reported a strong showing in the final stanza, as organic sales improved 6%, to $1.3 billion. The acquisition of CodeRyte added 1% to revenues, and currency translation effects reduced the top line by 1%. Sales were up across the board here, but the strongest growth was posted by the food safety, health information systems, oral care, and skin/wound care units.

Consumer & Office revenues were up 8%, to $1.1 billion, in the December quarter, as local-currency sales of 9% were reduced slightly by foreign exchange losses. Here, growth was led by consumer health care, DIY, and stationery and office supplies.

Display & Graphics reported a surprisingly strong performance in the final period, as revenues were $910 million. Internal sales growth was 8%, and the acquisition of Federal Signal Technologies added 3% to the top line. This was offset slightly by currency translation losses of 1%, but still amounted to an 11% gain overall. Optical systems was the standout unit, though sales of architectural products, traffic safety systems, and commercial graphics were also strong.

The Safety, Security & Protection Services group hit a bit of a snag in the December quarter, as sales slipped 3%, to $904 million. Local-currency revenues fell 2% and foreign currency translation had a 1% impact. Sales of security systems declined, but there was some growth in infrastructure protection.

Lastly, Electro & Communications, which like the Display & Graphics segment has been struggling due to soft consumer electronics demand, managed to eke out a 1% top-line gain, as internal sales growth of 2% was offset by foreign exchange headwinds of 1%. Revenues were up in both electrical and telecom markets, but sales continued to decline at the consumer electronics-related businesses.

From a geographic perspective, fourth-quarter sales were strong in Latin America/Canada (up 7%) and the U.S. (also up 7%). Growth in Asia/Pacific was solid, at 5%, and the decline in Europe, the Middle East, and Africa (EMEA) was limited to 2%. The decrease in EMEA sales was actually a strong improvement compared to the past few quarters and 2012 overall.

Switching gears, operating (EBITDA) margins were a hair lighter than we were expecting in the fourth quarter. In fact, the Health Care segment was the only group out of the six that beat our expectations. The other five groups only missed our marks by a few basis points here and there, so it is not much for investors to be concerned about, but it is definitely worth keeping an eye on.

Looking ahead to 2013, management reaffirmed guidance that was released back in December. 3M Company anticipates that share earnings will reach between $6.70 and $6.95, and it expects local-currency sales growth will range from 2% to 5%. We like the momentum the conglomerate has been building, and think 3M Company's combination of innovative technology, manufacturing prowess, and global scale will enable it to easily achieve these targets. We are estimating that sales will rise 4%, to $31.1 billion, and are looking for share earnings to climb 8%, to $6.85. The Wall Street consensus for sales and share earnings is currently $31.3 billion and $6.85, respectively.

Shares of MMM barely moved in the hours following the release of fourth-quarter earnings. This was not all that surprising, considering the stock price has risen more than 10% in the past two months alone. Moreover, the equity seems to be setting a new 52-week high every day. That said, we still like MMM, and recommend it for most portfolios. The stock is ranked 1 for Safety and has a below-market Beta, which makes it ideal for conservative investors seeking well-defined returns. The dividend yield is still 2.4%, despite the recent share-price appreciation. Moreover, we expect the annual payout to rise another 7% in 2013, making this equity a suitable income vehicle, as well. Finally, we think 10%-plus annual share-earnings growth is likely, and this figure could be pushed even higher with ongoing stock repurchases. Consequently, even though 3- to 5-year capital gains potential is only moderate now, investors should note there is some potential for greater growth.

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.