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3M Reports Record Q4 Sales, Raises 2018 Outlook Citing New Tax Law
3M's headquarters in Maplewood

3M Reports Record Q4 Sales, Raises 2018 Outlook Citing New Tax Law

Fourth quarter sales jumped 9 percent year-over-year, the Maplewood-based maker of Scotch tape and Post-It Notes said, while its earnings significantly dropped.

3M capped off 2017 with a record $8 billion in fourth quarter revenue, the industrial supplies manufacturer said Thursday, as sales in all five of its business groups rose between six and 15 percent.
 
The Maplewood-based company’s earnings, however, took a $762 million, or $1.25 per share, hit during the three-month period ending December 31, which it linked to the recent passing of the GOP’s Tax Cut and Jobs Act. 3M’s earnings in its final quarter of the year totaled $525 million, or 85 cents a share—a drop from the $1.2 billion, or $1.88 a share, it reported at the end of 2016.
 
“This net tax expense [of $762 million] includes the one-time transition tax on unremitted foreign earnings as well as true ups of tax deferred assets and liabilities,” said Nick Gangestad, 3M’s senior vice president and CFO, in a conference call Thursday morning.
 
Although tax reform weighed down 3M’s fourth quarter results, it’s expected to fatten the company’s bottom line next year.
 
In the same call, Gangestad said the new tax law is expected to drop 3M’s tax rate from a prior range of 26 and 27 percent to somewhere between 20 and 22 percent in 2018. With this in mind, 3M CEO Inge Thulin said during the morning call that the company’s anticipated full-year earnings could increase to a range of $10.20 to $10.70 a share, rising as much as 90 cents from its previous guidance range.
 
Investments in research and development in 2017 were also on the upswing, Thulin said. The company spent $1.9 billion, or 6 percent of its sales, on R&D efforts—an area of 3M that Thulin has regularly referred to as “the heartbeat” of the company. 3M’s R&D funding last year amounted to $1.7 billion.
 
Just as crucial, Thulin added, has been the company’s portfolio management over the last year. 3M divested four businesses that, according to Thulin, “no longer [aligned] with our strategic investments.” All the while, the company lined up several acquisitions, including its $2 billion purchase of protective device maker Scott Safety, which it closed early in its fourth quarter.
 
“These results are paying off,” said Thulin, “in terms of organic growth and also our premium margins and return on invested capital.”
 
3M stock was up roughly $6, or more than 2 percent, on Thursday to roughly $253.50 a share.