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"Blew" Chips: 3M Latest To Miss, Guide Lower On "Strong Dollar, Mixed Global Economy"

Tyler Durden's picture




 

If one steps back from the adjusted, non-GAAP EPS "beats" reported by companies this earnings season which benefit from what is set to be a record quarter of stock buybacks and an unprecedented drop in consensus expectations, Q1 earnings season for the "blue chips" so far has truly "blown", with revenue declines announced at IBM (12th in a row), McDonalds, Coke, and earlier today Procter & Gamble also reporting that its sales have fallen for fifth straight quarter. And then moments ago "diversified global tech" bellwether 3M reported that its sales declined 3.2% year-on-year to $7.6 billion. The company also missed its EPS, and adding insult to injury, "the company now expects earnings to be in the range of $7.80 to $8.10 per share versus $8.00 to $8.30 per share previously."

Why? Blame the soaring dollar which is taking away from US corporate profitability and giving to European, Japanese and any other geographic region that is actively crushing its currency. That, and the fact that there continues to be no global recovery (thanks Chinese hard landing).

From the company:

We are executing well against a more challenging economic backdrop in early 2015,” said Inge G. Thulin, 3M’s chairman, president and chief executive officer. “The stronger U.S. dollar negatively impacted sales and earnings in the first quarter, and global economic growth was mixed. Despite these near-term challenges, we grew organically in all business groups and all geographic areas, and expanded operating margins by nearly a full percentage point.”

Surprisingly, unlike Netflix, 3M doesn't realize that it can merely "add back" FX losses to non-GAAP EPS:

The company noted that foreign currency impacts reduced first-quarter pre-tax earnings by approximately $90 million or the equivalent of $0.10 per share. For 2015 in total, 3M now expects foreign currency impacts to reduce earnings by $0.35 to $0.40 per share versus a prior expectation of negative $0.20 per share.

All of this is happening even as the company "affirmed its expectation of 90 to 100 percent free cash flow conversion."  In other words, every dollar in cash flow will be promptly returned to shareholders.

The problem is that in Q1 3M generated $1.1 billion from operating activities and returned $1.5 billion in the form of dividends and buybacks. And even with that it was unable to beat.

Which makes one wonder: have we reached the tipping point where shareholder friendly action no longer leads to a quick and easy boost in company shares?

 

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Thu, 04/23/2015 - 07:57 | 6021296 duo
duo's picture

More layoffs before any cuts in stock buybacks.

Thu, 04/23/2015 - 08:00 | 6021299 VinceFostersGhost
VinceFostersGhost's picture

 

 

Blue chip full time jobs are going away too.

 

Correlation?

Thu, 04/23/2015 - 08:02 | 6021301 Headbanger
Headbanger's picture

Blue chip companies going away soon too.

Thu, 04/23/2015 - 08:12 | 6021328 Hype Alert
Hype Alert's picture

(Reuters) - Procter & Gamble Co (PG.N) reported a steeper-than-expected 8.3 percent fall in quarterly sales, blaming a strong dollar and said currency fluctuations would hurt 2015 sales by 6-7 percent.

 

Bullish!

Thu, 04/23/2015 - 08:03 | 6021304 buzzsaw99
buzzsaw99's picture

no moar boost?

that's just sad

Thu, 04/23/2015 - 08:06 | 6021314 Headbanger
Headbanger's picture

Yeah and the re-entry can really burn their ass!

Thu, 04/23/2015 - 08:10 | 6021315 Monetas
Monetas's picture

 Entitlement class now lives better .... than "Poor Woorkers" .... and lower middle class .... gaining rapidly on middle middle class .... for ease of lifestyle advantages .... join the "Love Train" !

Thu, 04/23/2015 - 08:11 | 6021323 XqWretch
XqWretch's picture

What the fuck is wrong with all these companies? Why are they all purposely gutting their capital investment/work force/production in order to raise their stock price? What the fuck is that supposed to accomplish? Don't they want to grow as an actual productive corporation, rather than just on paper? "Has the whole world gone crazy!?!!? Am I the only one around here that gives a shit about the rules!?!!?"

Thu, 04/23/2015 - 08:14 | 6021330 gmak
gmak's picture

nope.  Much more lucrative to play the paper game and reap those windfall option profits. Why labour for 20 years building a business when you can have 10's to 100's of millions in 5 years with some balance sheet leverage, share buybacks and accounting stretch. the game used to be "issue thin and win". Now it's borrow to the hilt, buy back shares, and retire before rates go up and cripple the company.

 

Oh.... and, what rules?

Thu, 04/23/2015 - 08:22 | 6021366 Monetas
Monetas's picture

Top 10 list .... unexpected consequences .... of Keynesian socialism !

Thu, 04/23/2015 - 09:51 | 6021709 oudinot
oudinot's picture

That's NEO-Keynesian socialism.

Thu, 04/23/2015 - 08:22 | 6021367 duo
duo's picture

Best uses of capital today:

1. buy influence in DC to skirt environmental, antitrust, and tax laws

2. buy back stock

3. severance packages for layoffs

4. H1B replacements

Thu, 04/23/2015 - 08:38 | 6021419 JoeTurner
JoeTurner's picture

"Irrational Exuberance" ? or ZIRP destroying the proper signaling mechanisms that lead to legitimate shareholder value maximization. 

Thu, 04/23/2015 - 08:39 | 6021424 Captain Willard
Captain Willard's picture

Put away the piece man, the CEO is very fragile.

I wish Tyler would post a chart of 3M's R&D budget relative to sales for the last 20 years. I assure you it has gone monotonically down. 

The last CEO spen his time cutting r&d and banging his assistant. He was replaced by another guy who has been purely devoted to off-shoring jobs and buying back stock and , of course, reducing r&d.

Thu, 04/23/2015 - 08:51 | 6021463 venturen
venturen's picture

COE Stock Options? Crooked banker advisers?

Thu, 04/23/2015 - 08:11 | 6021324 gmak
gmak's picture

CAT beat big time. Sales were up. Guidance re-affirmed for the fiscal year. They see world GDP growth at 2.15% and the lower oil prices will flow through to sales but not in 2015. Backlog is down - so maybe that's where those extra sales came from... channel stuffing maybe (a little bit).  CEO sees slow steady growth in USA, stronger than RoW (rest of world). Strong dollar impacting top line.

 

Nothing said sounds like exaggeration. 

Thu, 04/23/2015 - 08:19 | 6021349 d edwards
d edwards's picture

3M forgot to blame "the weather."

Thu, 04/23/2015 - 08:18 | 6021344 Monetas
Monetas's picture

Blew Corn Chips .... sanitation worker tells Rush .... more food thrown away in "low rent" areas .... than in frugal, affluent areas .... when you have to pay for your food .... you treat it with respect !

Thu, 04/23/2015 - 08:21 | 6021359 MFL8240
MFL8240's picture

No one misses because there is no global demad or products are outdated?  Just excuses like strong dollar and weather?  

Thu, 04/23/2015 - 08:23 | 6021368 SheepDog-One
SheepDog-One's picture

Stawks red? No doubt they'll fix that upon open.

Thu, 04/23/2015 - 08:23 | 6021369 One Eyed Jack
One Eyed Jack's picture

High jack the communists high holiday May 1st. Do this by dropping out of the system fo the day or the week.

Take cash out of the bank and pay only in cash and shop at small locally owned businesses, don't go to any national chains. Or stay at home. It is a nation wide citizen's strike

Thu, 04/23/2015 - 08:29 | 6021383 undercover brother
undercover brother's picture

This is how it's going to happen:  Corporate bottom lines decrease a bit due to the dollar strength.  As such, corporate campaign contribution to favorite politicians/charlatans decline dramatically.  The MSM will start yammering about the trade deficit being at record highs while behind the scenes the politicians pressure the fed to rejoin the currency debasing club asap.  problem solved.  

Thu, 04/23/2015 - 08:29 | 6021388 Last of the Mid...
Last of the Middle Class's picture

Not to worry IBM is partnering with apple to analyze and learn how to utilize all the medical data from it's iphone against the sheeple. Lots of money to be made there in conjunction with Obamacare. Monitor, Monitor, Monitor, we need more data so we can sell false talking points. 

Thu, 04/23/2015 - 08:30 | 6021390 Tinky
Tinky's picture

When asked to clarify the reference to a "mixed" global economy, a company representative said "Worse, and worserer."

Thu, 04/23/2015 - 08:50 | 6021460 Atomizer
Atomizer's picture

I love the smell of stock buy back options in the morning. 

Thu, 04/23/2015 - 09:01 | 6021507 Atomizer
Atomizer's picture

Buy into the corporate ass puckering stock ticker. MAIOF 

My ass is on fire. Amazon, drone me a dozen tubes of Preparation H. 

Thu, 04/23/2015 - 09:22 | 6021591 Debugas
Debugas's picture

last thing i boughtt from 3M was 1.44MB floppy disk

Thu, 04/23/2015 - 10:13 | 6021829 Nobody For President
Nobody For President's picture

Scotch Tape - don't forget Scotch Tape (C).

And Post It Notes (C). (The genuine ones, not the knock-offs.)

Modern Amurican offices can't make it without Scotch Tape and Post It Notes...

Thu, 04/23/2015 - 09:22 | 6021593 rlouis
rlouis's picture

Everyone knows that if a country wants to increase its exports the central bank buggers its currency.  So, are our central bankers stupid, or are they backed in to a different corner after leaving footprints through the paint from the other corner?

Thu, 04/23/2015 - 09:58 | 6021738 rejected
rejected's picture

Gotta love that 'strong dollar' shit. The only thing strong about it is the smell of CB manipulation. Why many laugh at the stock market, gold, silver, and libor manipulation,,, most seem to accept this strong dollar at face value.

Any number coming from government, quasi government, corporations (especially banks) and you name it should be accepted for what they are..... BULLSHIT.

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