Citing Slow Economy, MN Cos. Lower Earnings Outlooks

3M, Tennant, and Donaldson recently lowered their earnings outlooks, citing current economic conditions.

Several Minnesota companies have recently lowered their earnings outlooks, attributing the move to economic uncertainty and unfavorable currency exchange rates.

Among them are Tennant Company and Donaldson Company, whose announcements echoed recent concerns from 3M Company.

Tennant, a Golden Valley-based manufacturer of commercial cleaning equipment and products, said Wednesday that its earnings for the quarter that ended September 30 totaled $8.7 million, or 46 cents per share. That’s down 10 percent from $9.7 million, or 50 cents per share, during the third quarter of 2011.

Revenue, meanwhile, totaled $178.3 million—down about 5 percent from the third quarter of 2011, when the company reported record sales of $187 million.

The company’s sales in North America, its largest market, slid 3.3 percent during the quarter. “We had expected to see an improving North American economy in the third quarter, but instead the sales cycle slowed and some customers delayed capital equipment purchases,” President and CEO Chris Killingstad said in a statement.

Killingstad described Tennant as being in “strong financial shape,” and the company raised its quarterly dividend from 17 cents to 18 cents per share.

But Tennant said it expects to experience only “modest economic improvement” in North America, continued economic uncertainty in Europe, and a negative impact on sales from currency rates.

The company therefore lowered its full-year sales and earnings guidance: It previously expected earnings of between $2.30 and $2.45 per share on revenue of $770 million to $785 million. It now anticipates earnings in the range of $2 to $2.15 per share on sales of $735 million to $745 million.

“Our commitment to deliver enhanced growth and profitability is unchanged, although we are mindful that global economic conditions currently pose a challenge,” Killingstad said, adding that the company will focus on innovation and launch 42 new products during the fourth quarter of 2012 and in 2013.

Meanwhile, Donaldson, a Bloomington-based manufacturer of filtration systems, also said Wednesday that it is lowering its earnings outlook, stating that “conditions in many of our end markets have recently weakened.”

The company said that it too expects sales to be hurt by currency exchange rates, and it now predicts that full-year sales will be between $2.52 billion and $2.62 billion for the 2013 fiscal year ending in July. That would represent a 1 percent to 5 percent increase over last year, but it is lower than the company’s previously announced outlook: Donaldson said in August that it expected sales to be between $2.62 billion and $2.72 billion for its current fiscal year. The company now expects earnings to be between $1.68 and $1.88, down from its previous forecast of $1.82 to $1.96 per share.

The comments from Tennant and Donaldson echo those that Maplewood-based 3M made Tuesday. Despite reporting record third-quarter earnings, 3M reduced its full-year earnings outlook, citing “current economic realities.” The company now expects earnings to be in the range of $6.27 to $6.35 per share—down from the previously expected $6.35 to $6.50 per share.

“Regardless of economic conditions, we will remain focused on things within our control,” 3M Chairman, President, and CEO Inge Thulin said in a statement.

Other Minnesota companies also recently shared lackluster financial news. For example, struggling electronics retailer Best Buy Company, Inc., said Wednesday that it expects net income for its upcoming third-quarter financial results to be “significantly below” last year, while same-store sales are expected to drop. Minneapolis-based Capella Education Company, meanwhile, said Tuesday that its third-quarter revenues fell about 3 percent to $99.3 million, while net income plummeted nearly 50 percent to $5.1 million.

The stock price of many Minnesota companies fell sharply on news of their disappointing quarterly earnings and/or decreased full-year outlooks. A recent Associated Press story pointed out that the recent round of corporate financial reports have been underwhelming nationwide, and they have rattled investors. In fact, the Dow Jones industrial average fell Tuesday to its lowest level in nearly seven weeks. To read more about earnings trends at major companies across the country and the impact they have had on the stock market, read the full story here.

While a few Minnesota companies have recently lowered their outlooks, some have announced more positive financial results. For example, Minneapolis-based Select Comfort recently announced that third-quarter sales climbed 24 percent to $247 million, while per-share earnings climbed 48 percent to 46 cents—prompting the company to raise its full-year guidance. Thief River Falls-based Arctic Cat on Thursday reported record second-quarter earnings of $25 million. It too raised its full-year outlook.

And in a recent survey by Twin Cities Business magazine, Minnesota business leaders indicated that their business optimism heading into the last three months of the year is holding steady after slipping during the second quarter. To learn more, click here.

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