3M beats expectations, helps Dow hit a record

3M Co. and Caterpillar posted stronger-than-expected quarterly earnings and raised their outlooks, leading the Dow Jones Industrial index to another record.

Combined, the two companies were responsible for almost all of the 167-point gain in the Dow, which sent the 30-stock index to a record high. 3M stock saw its largest daily gain in eight years, closing up 5.9 percent to $234.65.

3M said sales jumped 6 percent to $8.2 billion during the quarter ending Sept. 30. Earnings rose 7 percent to $1.4 billion or $2.33 per share. The results easily beat Wall Street expectations, which averaged $2.21 a share.

The Maplewood-based maker of products from Scotch tape and Post-it notes to respirators, safety harnesses and electronics reported revenue increases across all five of its businesses. The largest growth — 13.1 percent — came from 3M's previously temperamental Electronics and Energy unit.

"3M seems to be executing on pretty much everything we can measure," Scott Davis, an analyst with Melius Research, said in a note.

Caterpillar and 3M are two of the biggest winners in the Dow average this year. Caterpillar's revenue from construction equipment climbed, and the company said it's getting strong demand for oil and gas machinery in North America and construction equipment in China. Its stock gained $6.56, or 5 percent, to $138.24, and it's up 49 percent in 2017.

Bond yields and interest rates rose, which helped banks, and technology companies climb as well. Investors applauded reports from McDonald's and General Motors while health care companies including drugmakers stumbled.

The Standard & Poor's 500 index gained 4.15 points, or 0.2 percent, to 2,569.13. The Dow Jones industrial average jumped 167.80 points, or 0.7 percent, to 23,441.76. The Nasdaq composite climbed 11.60 points, or 0.2 percent, to 6,598.43. The Russell 2000 index of smaller-company stocks added 2.93 points, or 0.2 percent, to 1,500.42.

During a conference call Tuesday morning, CEO Inge Thulin said 3M enjoyed an uptick in demand for its electronics adhesives and other products that help manufacturers make mobile devices and semi conductors.

Thulin added that the electronics and energy business benefited because 3M invested in other fast-growing segments of the electronics sector.

Executives also noted that 3M's largest division, industrial, did well during the quarter, with 6.2 percent growth in revenue due to strong demand for the company's advanced materials, industrial adhesives and tapes, and separation and purification products.

3M's strong performance suggests that the lackluster, slow growth of 2016 is largely behind it. Like most multinational companies, 3M had been affected by the high U.S. dollar, and the global downturns in electronics, mining and oil and gas sectors. Two-thirds of the company's sales are overseas.

Not anymore. Thulin's 80-minute call with analysts Tuesday was frequently peppered with congratulations for "the great quarter."

"Organic revenue growth of 6.6 percent was the highest the company has achieved since" the first quarter of 2011, Deane Dray, an analyst at RBC Capital Markets, said in a note. With gains across the board, the results were "impressive."

3M executives raised their full-year 2017 earnings guidance, saying it is now expected to jump 10 to 12 percent to $9 to $9.10 a share. That is up from the prior guidance of $8.80 to $9.05 per share.

Thulin said the increase was justified even as concerns about raw-material price increases harden.

"Coming off a strong first half, our team delivered an even more robust performance in the third quarter, marked by an 8 percent increase in earnings per share, and 7 percent organic growth that was positive across all business groups and geographic areas," Thulin said. "We also expanded margins to 25 percent, while investing for the future and returning significant cash to our shareholders."

Includes reporting from Bloomberg and the Associated Press.

Dee DePass • 612-673-7725