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3M’s Industrial Segment Revenues Rose: Here’s Why

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Performance of 3M’s Industrial segment in 3Q17

3M’s (MMM) Industrial segment is the company’s largest revenue contributor, with a revenue share of 33.80% in 3Q17, and it maintained its revenue share from 3Q16. The segment reported revenue of $2.76 billion in 3Q17, an increase of 6.2% on a year-over-year basis. In 3Q16, this segment reported revenue of $2.60 billion. The segment recorded organic growth of 6.10% in the quarter.

The segment’s revenue growth was primarily driven by good business growth in the OEM (original equipment manufacturers) segment. Strong growth was also seen in the industrial adhesives and tapes, advanced materials, and separation and purification businesses. Geographically, Asia-Pacific led growth by 9.0%, the United States grew, the EMEA (Europe, the Middle East, and Africa) grew 5.0%, and Latin America and Canada grew 6%. Further, the positive currency translation helped the segment’s revenue grow 0.70%. In contrast, the divestiture had an adverse impact of 0.60% on the segment’s revenue.

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Industrial segment’s net income and margin

The Industrial segment reported operating income of $6,140 million in 3Q17 compared to $595.0 million in 3Q16, an increase of 3.20% year-over-year. The segment reported an operating profit margin of 22.20% in 3Q17 compared to 22.90% in 3Q16, a fall of 70 bps (basis points) year-over-year. The margin fell primarily because of divestitures.

Outlook for the Industrial segment

The Industrial segment is expected to continue its upward trend, driven by strong demand for advanced materials. Weakness in the US dollar could remain favorable for 3M. Geographically, Asia-Pacific is expected to lead the growth.

Investors looking to invest in 3M indirectly can invest in the iShares MSCI USA ESG Select ETF (KLD), which has invested 5.40% of its portfolio in 3M. The fund’s other holdings include Microsoft (MSFT), Apple (AAPL), and Caterpillar (CAT) with weights of 5.40%, 3.80%, and 1.50%, respectively, as of October 25.

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