Why 3M’s Health Care Segment’s Revenue Rose in 3Q17



3M’s Health Care segment in 3Q17

3M’s (MMM) Health Care segment recorded a revenue share of 18.0% in 3Q17, compared to 17.80% in 3Q16. The revenue increase helped with a 0.20 percentage point rise in 3M’s total revenue. The segment reported revenue of $1.47 billion in 3Q17 compared to $1.37 billion in 3Q16, implying revenue growth of 7.70% on a year-over-year basis.

The segment’s revenue growth was primarily driven by sales growth in drug delivery systems, food safety, oral care, and medical consumables. Geographically, sales grew across all regions, led by 9% growth in Asia-Pacific, Latin America, Canada, and the United States. However, EMEA (Europe, the Middle East, and Africa) saw marginal growth of 2%. The foreign currency translation had a positive impact and improved sales by 0.80%.

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Health Care segment’s net income and margin

The Health Care segment reported operating income of $471.0 million in 3Q17, compared to $431.0 million in 3Q16, an increase of 9.30% on a year-over-year basis. It reported an operating profit margin of 31.90% in 3Q17, compared to 31.50% in 3Q16, an increase of 40 basis points year-over-year.

Outlook for the segment

3M’s earlier investment in this segment for future growth is showing results. The developing markets of China, Hong Kong, and Latin America are expected to drive growth.

You can get exposure to 3M by investing in the iShares U.S. Industrials ETF (IYJ), which has invested 4.3% of its portfolio in 3M as of October 24. The fund’s top holdings include General Electric (GE), Boeing (BA), and Honeywell (HON) with weights of 5.7%, 4.5%, and 3.4%, respectively.


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