How 3M’s Health Care Segment Performed in 4Q17



3M’s Health Care segment in 4Q17

3M’s (MMM) Health Care segment recorded a revenue share of 18.4% in 4Q17 compared to 19.0% in 4Q16. This represents a decline of 0.60 percentage points in 3M’s total revenue. The segment reported revenue of $1.5 billion in 4Q17 compared to $1.4 billion in 4Q16, implying revenue growth of 5.8% on a year-over-year basis.

The segment’s revenue growth was primarily driven by sales growth in the businesses of food safety, health information systems, medical consumables, and Oral Care. However, the drug delivery systems business witnessed a decline. Geographically, sales grew across all regions, led by 11% growth in Asia-Pacific, 4% growth in Latin America/Canada, 3% in EMEA (Europe, the Middle East, and Africa), and 1% in the US region. The favorable foreign currency translation had a positive impact and improved sales by 2.8%.

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Health Care segment’s net income and margin

The Health Care segment reported operating income of $464.0 million in 4Q17 compared to $413.0 million in 4Q16, an increase of 12.3% on a year-over-year basis. It reported an operating profit margin of 31.5% in 4Q17 compared to 29.7% in 4Q16, an increase of 180 basis points year-over-year. The margins improved primarily due to organic growth.

Outlook for the segment

The growth is expected to continue for this segment driven by the robust growth in the Asia-Pacific region. The weaker US dollar is expected to work in favor of this segment to push the revenues. 3M also launched Tegaderm Silicone Foam Dressing and Cavilon Advanced Skin Protectant, which could drive the segment’s revenue up.

You can get exposure to 3M by investing in the iShares U.S. Industrials ETF (IYJ), which invests 4.3% of its portfolio in 3M. The fund’s top holdings include General Electric (GE), Boeing (BA), and Honeywell (HON) with weights of 3.9%, 5.3%, and 3.5%, respectively, as of January 26, 2018.


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