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3M’s Electronics and Energy Segment: Why 1Q17 Revenue Rose

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Performance of 3M’s Electronics and Energy segment in 1Q17

3M’s (MMM) Electronics and Energy segment is the company’s fourth-largest revenue contributor, with a revenue share of ~15.8% in 1Q17. It reported revenue of ~$1.2 billion in 1Q17, an 11.1% rise compared to ~$1.1 billion in 1Q16. The segment’s organic sales rose 11.5% in 1Q17.

Revenue for the Electronics and Energy segment rose primarily due to phenomenal growth in display materials and systems and electronics materials solutions. Geographically, Asia Pacific led the growth at 17.0%. The EMEA (Europe, the Middle East, and Africa) and the United States saw growth of 3.0%, while Latin America and Canada remained flat. The segment was adversely impacted by foreign exchange hedges.

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Net income and margins

The Electronics and Energy segment reported operating income of $225.0 million in 1Q17 compared to $195.0 million in 1Q16, a rise of 15.4% year-over-year. It had an operating profit margin of 18.6% in 1Q17 compared to 17.9% in 1Q16, a rise of 90 bps (basis points) year-over-year.

Outlook for the segment

Asia-Pacific is expected to continue its robust growth and drive the segment’s growth going forward.

You can get exposure to 3M by investing in the iShares US Industrials (IYJ), which has invested 4.0% of its portfolio in 3M as of April 24, 2017. The fund’s top holdings include General Electric (GE), Boeing (BA), and Honeywell (HON), with weights of 8.9%, 4.0%, and 3.4%, respectively.

In the next part, we’ll review the performance of 3M’s Consumer segment in 1Q17.

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