Diversified technology giant 3M (MMM) reported first-quarter share net of $1.29, compared to the year-earlier $0.73 and our estimate of $1.20. The outsized gain wasn't particularly surprising because quarterly comparisons have been easy over the last two quarters due to the prior recession. Still, the company is clearly benefiting from gradually improving global economies, spearheaded by fast-growing Asian demand. This is somewhat encouraging because 3M is widely considered to be a barometer of worldwide economic health due to vast geographic and business line diversification.
Operating income in all six of the company's segments increased smartly, with Industrial & Transportation leading the way with a sizzling 159% gain, to $454 million. This was thanks mainly to greater demand in the Asia/Pacific region.
3M's return on capital, at 20%, has been one of the highest in the diversified chemical industry, thanks to its long-term optimal balance sheet and prudent working capital management. We see no reason why this should change in the years ahead, given the company's renewed focus on innovation, which should spur strong top-line growth.