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Understanding 3M’s Revenue in 1Q17: Why Analysts Expect a Marginal Rise

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3M’s 1Q17 revenue estimates by analysts

Analysts expect 3M’s (MMM) revenues to increase on a YoY (year-over-year) basis. As of April 20, 2017, analysts expect 3M to post revenues of $7.47 billion in 1Q17, as compared to $7.41 billion in 1Q16—a rise of 0.8% over the previous year. The expected increase in 3M’s revenue shows a turnaround after two years in a declining trend.

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What could drive up 3M’s revenue in 1Q17?

Organic growth could primarily drive the expected revenue growth for 3M in 1Q17, while the continued demand in the automotive and OEM (original equipment manufacturer) spaces is expected to contribute to sales growth as well.

The acquisition of Scott Safety from Johnson Controls (JCI) is expected to be completed in the second half of 2017 and would add to 3M’s revenue from 2Q17 onwards. At the same time, the weakness of the US dollar in the first quarter of 2017, as compared to the basket of major currencies, and new product launches could help MMM’s revenue growth in 1Q17.

Eyewear and identity management

On the other hand, 3M’s revenue is expected to be adversely impacted by the divestitures of its eyewear business and identity management business. The combined annual sales from these two businesses are estimated to be ~$260 million.

Notably, investors can get indirect exposure to 3M by investing in ETFs, such as the Industrial Select Sector SPDR ETF (XLI), which had 5.5% of its portfolio in 3M on April 20, 2017. XLI’s top holdings include General Electric (GE), Honeywell (HON), and Boeing (BA), with weights of 9.2%, 4.7%, and 5.0%, respectively, on April 20.

In the next part, we’ll look at analysts’ earnings estimates for 3M.

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