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 3M's repurchase plan brings the total buyback authorizations
announced by U.S. companies this year to about $460 billion, the
highest since 2007 and the onset of the global financial crisis.
The company's shares rose as much as 3 percent after it also raised
its quarterly dividend by a third and said it would spend between $5
billion and $10 billion on acquisitions through 2017.
Morgan Stanley analyst Nigel Coe said the dividend increase signaled
confidence, while the acquisition plans represented "a major shift
in tone from this historically conservative team."
3M said on Tuesday it expected its 2013-2017 share repurchases to be
in the range of $17 billion to $22 billion, up from its previous
estimate of $7.5 billion to $15 billion.
The top end of the new range represents about 25 percent of 3M's
market value — making its plan the largest possible capital return
in percentage terms among U.S. companies that have announced
buybacks this year.
Other companies announcing big buybacks this year include Microsoft
Corp, Boeing Co and Deere & Co.
Companies typically buy back shares to increase the value of the
stock remaining. However, share prices of many companies, including
3M, are at or near record highs.
"At this point in time, there does appear to be excess cash (and)
corporations do not want to sit on such a large asset, especially
considering the low return that their market instruments are
making," S&P Dow Jones Indices analyst Howard Silverblatt told
Reuters.
3M did not say how it would fund the buyback. It had cash and
equivalents of about $2.3 billion as of September 30.
JP Morgan analyst Stephen Tusa noted that 3M's repurchase plan
translated to only about $4 billion per year.
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3M said in July it expected 2013 share repurchases to be in the
range of $3.5 billion to $4.5 billion.
The company said on Tuesday it would raise its quarterly dividend to
88.5 cents from 63.5 cents, which works out to an additional payout
of $585 million if maintained for a year.
St. Paul, Minnesota-based 3M forecast 2014 organic sales to rise by
3-6 percent, excluding the effect of foreign exchange. Analysts on
average were expecting the company to report 2013 revenue of $31.01
billion.
3M said it expected earnings of between $7.30 and $7.55 per share
next year. Analysts on average expected $7.40 per share on revenue
of $32.63 billion, according to Thomson Reuters I/B/E/S.
3M shares were up 2.4 percent at $130.71 in afternoon trading on the
New York Stock Exchange.
The stock, which hit an all-time high of $134.15 in November, has
risen by more than a third this year.
(Additional reporting by James Kelleher;
editing by Joyjeet Das and Saumyadeb Chakrabarty)
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