In the congenial world of fly fishing, very little changes.
But recently, the placid corporate environment of fishing equipment was shaken up, as privately held The Orvis Company Inc. from Manchester, Vermont announced it will acquire two corporations, Scientific Anglers and Ross Reels, from 3M Company (NYSE/MMM).
Both businesses will operate separately from the main Orvis business. They must not have been large enough to be meaningful to 3M’s earnings results.
Apparently, as a corporation, Orvis is the longest-running mail-order business in the United States. Not only does the company sell good fly fishing equipment, but it also sells clothing, home furnishings, gifts, and even products for your dog.
3M reported first-quarter earnings that could only be described as mediocre. But on the stock market, 3M is trading at an all-time record high with a 2.4% dividend yield and a price-to-earnings (P/E) ratio of approximately 17.
While not expensively priced, earnings for 3M came in at $1.129 billion, or $1.61 diluted earnings per share. This was flat compared to the $1.125 billion, or $1.59 diluted earnings per share, generated in the first quarter of 2012.
3M’s first-quarter 2013 sales grew two percent to $7.6 billion.
In February, the corporation authorized another dividend increase of 7.6%, marking the 55th consecutive year of increased dividends.
It also authorized another share buyback program of up to $7.5 billion to pay for its dividends and to keep shareholders happy.
The company’s cash and marketable securities position grew to $4.4 billion, up from $3.7 billion. The gain was not as big as those of other corporations, but it was still significant.
3M reduced its full-year earnings outlook just slightly. Top-line growth certainly is an issue for the company, but it’s doing all it can to keep shareholders happy—increasing its dividends and buying back shares.
In a more normal environment for stocks, a corporation like 3M would’ve sold off after such a lackluster earnings report.
The numbers from large corporations reveal an improvement in their overall financial health as balance sheets improve. Cash positions are rising, and the costs of interest rates on debt are extremely low.
The improved health of large corporations offers more certainty, and institutional investors are buying it.
The fact that a stable, but slow-growth corporation like 3M is trading at an all-time record high on the stock market illustrates the continued appetite institutional investors have to be buyers.
I view investment risk as going up because of all the new highs, but regardless of this, the fact still remains that big investors are buying.
The monetary party continues until there’s a shock.
Fly Fishing Shaken Up; Orvis Acquires Corporations from Struggling 3M was last modified: May 9th, 2013 by Mitchell Clark, B.Comm.
Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »
Forecasts Aug. 30, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 30, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)