3M Company (NYSE:MMM) recently released its fourth-quarter 2023 results, revealing earnings that exceeded the Zacks Consensus Estimate, while experiencing a slight decline in revenues on a year-over-year basis.
During the fourth quarter, 3M achieved adjusted earnings of $2.42 per share, outperforming the Zacks Consensus Estimate of $2.31. This marked an increase from the $2.18 reported in the corresponding quarter of the previous year.
Although the company’s net sales of $8,013 million surpassed the Zacks Consensus Estimate of $7,686 million, the top line saw a marginal 0.8% decrease year over year. The decline was primarily attributed to a 1.9% decrease in organic sales. However, the impact of foreign currency translation was positive at 0.9%, and acquisitions contributed 0.2% to the top-line growth.
Breaking down the performance regionally, organic sales in the Americas increased by 0.3% year over year, while the Asia Pacific region witnessed a decline of 5.8%. In Europe, the Middle East, and Africa, organic sales decreased by 0.6%.
Segment-wise, the Safety and Industrial segment reported revenues of $2,661 million, reflecting a 2.7% year-over-year decrease. Transportation & Electronics, on the other hand, saw a 4.5% increase in revenues to $1,769 million. Health Care revenues amounted to $2,037 million, down 0.3%, and Consumer segment revenues fell 1.6% year over year to $1,226 million.
3M’s cost of sales increased by 2% year over year to $4,678 million. However, selling, general, and administrative expenses decreased by 24.3% to $1,625 million, while research, development, and related expenses increased by 4.9% to $467 million.
Operating income for the quarter was $1,243 million, compared to $632 million in the year-ago period. The adjusted operating income rose by 9.1% year over year to $1,608 million, with the adjusted operating margin reaching 20.9%, up from 19.1% in the same quarter of the previous year. The adjusted tax rate for the quarter was 14.9%, compared to 16.6% in the year-ago period.
Exiting the fourth quarter, 3M had cash and cash equivalents of $5,933 million, up from $3,655 million at the end of December 2022. Long-term debt stood at $13,088 million compared to $14,001 million at the end of December 2022.
For the full year 2023, 3M generated net cash of $1,986 million from its operating activities, representing a 3.3% increase from the year-ago quarter. Adjusted free cash flow at the end of the fourth quarter was $1,955 million, marking a significant 17.8% year-over-year increase. Adjusted free cash flow conversion reached 145% at the end of the same period.
Looking ahead to 2024, 3M anticipates adjusted earnings in the range of $9.35 to $9.75 per share. The mid-point of the guided range, $9.55, falls slightly below the Zacks Consensus Estimate of $9.90. Adjusted total sales are expected to grow in the range of 0.25% to 2.25%, implying an adjusted organic sales growth of 0% to 2%. The company projects adjusted operating cash flow of $6.5 billion to $7.1 billion, with a conversion rate of 95% to 105% for adjusted free cash flow.
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