3M Stock Worth $97: Trefis

3M continued its consistent performance as it delivered another quarter of steady growth driven by strength in the Americas region. This growth was broad-based as four out of the company's six divisions recorded solid growth. 3M competes with other industrial conglomerates like Dupont and Avery Dennison.

The company's revenues for the fourth quarter of 2011 stood at $7.1 billion, up 5.7% compared to the prior year. This sales increase was driven primarily by acquisitions (+2.3%), with some organic volume growth (+1.3%). While 3M's gross margins shrunk for the fifth consecutive quarter to 46.5%, its net income increased to $954 million. The fastest region of growth for the company was Latin America/Canada where it recorded a 10% growth in sales while in the U.S. it recorded a strong 7% increase.

With the cooling of the Chinese economy and weakness in the consumer market, growth in Asia fell considerably from previous quarters to about 3%. The surprise has been Europe where, in spite of macroeconomic conditions and softness in Western European demand, the company was able to register 4% growth. The company's operating margins decreased by 0.2 percentage points to 19.2% from the prior year mainly on account of higher pension costs. To contain these pension costs, the company has put a freeze on hiring in developing countries. See our complete analysis for 3M.

The Industrial and Transportation division was the company's fastest growing segment in the fourth quarter, as sales increased 14.3% from the prior year to $2.4 billion. The division saw double digit growth in abrasives, aerospace, industrial adhesives & tapes, energy & advanced materials and auto OEM, while operating income of $472 million was up 14% from the prior year. Sales increased by 17% in Asia Pacific, 15% in the U.S. and 12% in Europe.

The company also won some new business which holds strong promise for future periods. 3M won major contracts from auto majors for catalytic converters and cabin noise reductions while 30% of its growth in tapes and adhesives came from new applications in medical devices, specialty vehicles and construction markets. 3M is also partnering with a systems integrator to deploy the world's largest solar collector in the Mojave Desert region.