uploads///Part  Q EPS

Why 3M Analysts Foresee a Big EPS Leap for 2Q17


Jul. 19 2017, Updated 3:05 p.m. ET

3M’s 2Q17 earnings per share estimates

As of July 17, 2017, analysts expect 3M (MMM) to post EPS (earnings per share) of $2.54 in 2Q17, which would represent an increase of 22.1% on a YoY (year-over-year) basis. In 2Q16, MMM reported EPS of $2.08.

The expected rise in MMM’s EPS could be primarily driven by improved operating expenses. Analysts are expecting MMM’s SG&A (selling, general, and administrative expenses) to reach ~$1.3 billion, representing ~17.0% of its expected revenue in 2Q17. MMM’s SG&A expenses in 2Q16 totaled just under $2.0 billion, representing 26% of its sales. This implies a reduction of 900 basis points.

MMM’s COGS (cost of goods sold) is expected to come in at ~$3.8 billion, representing 48.2% of its expected 2Q17 revenue, while MMM’s COGs in 2Q16 was $3.8 billion, representing 49.5% of total sales. This implies a gain of 130 basis points.

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Share buybacks

To boost EPS, many companies do share buybacks. In 1Q17, MMM bought back ~3.5 million shares worth $690 million under its $10 billion share repurchase program, which was authorized in February 2016. At the end of 1Q17, MMM still had ~$6.5 billion. MMM intends to spend ~$2.5 billion to reach a total of $4.5 billion in fiscal 2017.

Investors can invest in MMM indirectly through the Industrial Select Sector SPDR Fund (XLI), which has 5.7% of its portfolio in MMM. The top holdings of the fund include General Electric (GE), Boeing (BA), and Honeywell (HON), which had weights of 7.6%, 5.4%, and 4.8%, respectively, in the fund on July 17, 2017.

In the next part, we’ll look into MMM’s latest analyst recommendations.


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