What Led to the Fall in 3M’s Consumer Segment in 1Q17?



Performance of 3M’s Consumer segment in 1Q17

The Consumer segment is 3M’s (MMM) lowest revenue contributor, with a revenue share of 13.5% in 1Q17. The segment reported revenue of $1.04 billion in 1Q17, an 0.80% fall compared to $1.05 billion in 1Q16. The segment’s organic sales fell 1.2% in 1Q17.

The segment’s revenue fell compared to the previous year, plagued by its declining stationery and office business. However, its home improvement, consumer healthcare, and home care businesses grew. Geographically, Asia-Pacific grew 7.0%, and Latin America and Canada grew 2.0%. The EMEA (Europe, the Middle East, and Africa) remained flat, while US sales fell 5.0%.

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Net income and margins for the Consumer segment

3M’s Consumer segment reported operating income of $222.0 million in 1Q17 compared to $238.0 million in 1Q16, a fall of 6.7% year-over-year. The segment reported an operating profit margin of 21.3% in 1Q17 compared to 22.7% in 1Q16, a fall of 120 bps (basis points) year-over-year.

Outlook for the segment

The Consumer segment is expected to have challenges in the stationery and office space, which could adversely impact revenues going forward. However, demand in the home improvement space could be a bright spot.

You can get exposure to 3M by investing in the SPDR SSGA Gender Diversity Index ETF (SHE), which has invested 3.7% of its portfolio in 3M as of April 24, 2017. The fund’s top holdings include Pfizer (PFE), PepsiCo (PEP), and Amgen (AMGN), with weights of 6.6%, 5.3%, and 4.0%, respectively.

In the next part of this series, we’ll look at analysts’ recommendations for 3M stock.


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