Innovation seems to be perhaps the most important attribute for companies these days. 3M (MMM), the maker of everything from Post-It Notes to films that brighten TV screens, is one of the top corporate innovators in American history.
The company actually invented Post-It Notes, Scotch tape and masking tape. It also was at the forefront of digital audio recording machines. That entrepreneurial culture and a relentless focus on profits have helped 3M thrive since its founding more than 100 years ago. For instance, free cash flow has averaged 13 percent of sales during the past 10 years.
3M has thousands of products that it sells around the world, and when it comes up with a technological innovation, the company is able to apply the new technology across its product lines.
Given all these strengths, you would do well to consider 3M’s stock.
3M reported that net income rose 16 percent in the first quarter, to $1.08 billion from $930 million a year earlier, topping analysts’ estimates. Sales gained 15 percent to $7.31 billion, also beating analysts’ forecasts.
The company’s industrial and transportation division, its largest in terms of sales, saw revenue climb 17 percent amid strong demand from aerospace and energy companies.
“We are off to a tremendous start in 2011 with first-quarter organic sales growth of 9 percent,” 3M CEO George Buckley said in a statement. “New product flow is accelerating, boosted by higher investment in laboratory, sales and marketing and manufacturing capacity. … Our businesses are growing most everywhere in the world.”
Strong demand overseas, especially in emerging markets, which accounts for 34 percent of the company’s revenue, helped juice profits. Sales to India soared 30 percent, sales to China and Hong Kong surged 27 percent and sales to Brazil jumped 25 percent. 3M estimates that 45 percent of its sales will come from emerging markets by 2015.
3M’s strong revenue gain is “a trend we expect to continue,” writes Standard & Poor’s analyst Matthew Christy. He just raised his target for UPS stock to $101 from $97. It closed at $96.47 on April 27.
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