3M Slips as 2Q Earnings Fail to Impress

3M (NYSE:MMM) reported in-line second-quarter profits and upped the low end of its earnings forecast on Tuesday, but the maker of Post-Its and dozens of other products saw its stock drop anyway.

The St. Paul-based diversified manufacturer said it earned $1.16 billion, or $1.60 a share, last quarter, compared with a profit of $1.12 billion, or $1.54 a share, a year earlier. Analysts had called for EPS of $1.60.

Revenue increased 14% to $7.68 billion, surpassing the Streets view of $7.6 billion. Organic sales volumes gained 3.2%, while selling prices inched up 0.8%. Gross margins shrank to 47.4% from 49%.

3M said sales rose around the world, including a 24.1% leap in Europe and a 20.2% jump in Latin America/Canada. Sales increased 11% in Asia Pacific and 8.7% in the U.S.

At the same time, five of 3Ms six business units posted sales growth, led by a 24.6% jump in its industrial and transportation business.

We posted record second-quarter sales and earnings per share and generated significant free cash flow in the quarter, and we did so in the face of some sizable headwinds, CEO George Buckley said in a statement.

Looking ahead, 3M narrowed its 2011 EPS range to $6.10 to $6.25, compared with $6.05 to $6.25 previously. Analysts have been calling for 2011 EPS of $6.29. Organic sales volume growth is still seen rising 6% to 7.5%.

While economic growth moderated a bit in the second quarter, we believe that the global economy will continue to expand and 3M is well-positioned to capitalize on that growth, Buckley said.

3M said it expects disruptions caused by the massive Japanese earthquake cut its second-quarter EPS by 7 cents. Those disruptions are also seen lowering 3Ms 2011 bottom line by 12 cents a share.

Wall Street expressed disappointment in 3Ms results, sending its stock dropping 3.39% to $91.85 ahead of Tuesdays open. 3M had been up just over 10% in 2011.