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									                                                                                                          Company Report
                                                                                         Global Industrial Infrastructure
 April 28, 2010 | 18 Pages



 3M CO. (NYSE: MMM)                                                                                             RATING: BUY
 TAKE OFF YOUR 3-D GLASSES: EMERGING SIGNS                                                     Fiscal Year Ends Dec
 UNDERSCORE THAT 3M'S STRING OF QUARTERLY
 SURPRISES ARE SOURCED IN FUNDAMENTAL (NOT JUST                              Rating:                                             Buy
 CYCLICAL) CHANGE                                                            Price: Close                                     $87.97
                                                                             Price Target:                                      $102
       Cyclical Tailwinds Shouldn’t Obscure Growing Evidence Of              52-wk Range:                              $53.74-$87.79
       Secular      Change      Enabling    3M’s      Three-Dimensional      Market Capitalization (M):                   $62,511.41
       Fundamental Improvement – Regional R&D centers producing              Shares Outstanding (M):                          710.60
       locally-optimized versions of 3M’s products, rising market shares     Avg. Daily Vol. (000):                         4,235.96
       from much closer collaboration with end market customers (rather      Dividend:                                         $2.06
       than OEM producers), expanded regional LCC production closer          Dividend Yield:                                  2.34%
       to local markets, a reincarnation of 3M’s R&D preeminence and         Consensus EPS Current Year:                       $5.24
       dramatically expanded new product development, promotion and          Consensus EPS Next Year:                          $5.84
       marketing have resulted in secular improvement in the                 Est. 3-yr. EPS Growth:                       13% - 15%
       sustainability of 3M’s organic growth. As broader acceptance of
       this reality takes hold, 3M’s shares are likely to be revalued as a   Nicholas P. Heymann            Lawrence T. De Maria,
       growth rather than a cyclical growth stock.                                                                           CFA
       Skeptics Abound When Told “This Time Something’s                      (212) 338-4703                        (212) 338-4704
       Different” – Though it’s natural to assume a reversion to the         nheymann@sterneagee.com          ldemaria@sterneagee.com
       mean, as comparisons become more challenging and 3M’s
                                                                             Ben Elias, CFA                         Samuel H. Eisner
       “4WD” organic growth continues to power sharply higher
                                                                             (212) 338-4706                           (212) 338-4705
       earnings growth, investors are likely to appreciate why the           belias@sterneagee.com             seisner@sterneagee.com
       company’s number one focus for reinvestment is 3M’s own
       organic growth initiatives: 3M’s net ROTC from cont. ops.
       averaged 17.3% over the past year but rose to 30.5% in 1Q10.
       Target Price Reduced To $102 Due Solely To Market Decline –
       Our revised 6-12 month price target is based on our 2010E EPS
       estimate of $5.60 and FactSet's 2010E S&P 500 P/E of 14.6X
       (down from 15.0X previously) based on FactSet’s 2010E S&P
       500 EPS of $81.05 and assumes 3M's shares trade at a 25%
       premium to the S&P 500. Over the past 2 years, 3M has traded at
       an average 6% P/E discount to the S&P 500 in a range of a 13%
       relative premium to a 26% relative discount on CY EPS. Over the
       past decade, 3M has traded at an average 13% premium in a range
       of a 27% discount to a 49% premium on CY EPS. 3M is trading
       at a 4% relative P/E premium based on our 2010E EPS of $5.60.
                                                      Earnings Summary
FYE Dec                            2009A                          2010E                                   2011E

                                                   EPS & P/E Summary
                                   2009A    2009 Previous       2010E 2010 Previous                       2011E      2011 Previous
EPS:         Q1                     $0.81               --       $1.40            --                           --                --
             Q2                     $1.20               --       $1.46            --                           --                --
             Q3                     $1.38               --       $1.41            --                           --                --
             Q4                     $1.30               --       $1.33            --                           --                --
             Full Year              $4.64               --       $5.60            --                       $6.45                 --
P/E Ratio:                           19.0               --        15.7            --                        13.6                 --

   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
             800 Shades Creek Parkway           Suite 700          Birmingham, AL 35209                   205-949-3500
                                   Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
3M CO. (NYSE: MMM)                                                                            April 28, 2010

The Reasons May Be “Fuzzy” But The Change In Performance Increasingly
Appears Real

Imagine a company trying to explain corporate alchemy – that was almost 3M’s
challenge when it reported exceptional 1Q10 earnings which not only far surpassed
expectations, but did so at a reaccelerating rate almost equal to the company’s “one time”
prior peak positive surprise of $0.22 when it reported 3Q09 earnings as the global
economy began to rebound. As a very short lead-time provider of consumables servicing
a vast swath of global end markets, the concept that 3M’s fundamentals could recover far
more quickly than most other longer lead-time industrial manufacturers appeared to make
logical sense. However, the apparent re-acceleration in the company’s ability to
positively surprise left most observers scratching their heads. What could possibly have
changed? We ourselves had been advised by far more astute investors that what occurred
could actually have been anticipated. While we couldn’t with any high degree of
confidence model 3M’s most recent quarterly accomplishment prior to their
announcement, we do believe that there are several critical underpinnings that are
emerging more clearly which give us confidence that the company’s absolute and relative
fundamental momentum reacceleration is a product of several critical initiatives.

Many of these initiatives were implemented during the global downturn and never had
the opportunity to be leveraged by higher volumes. Collectively, however, they are now
culminating and resulting in levels of performance which most investors familiar with
3M (or most industrials, for that matter) simply have no ability to verify their
sustainability. Realize some of the ideas listed below sound so “out there” they may be
hard to grasp let alone be fundamentally measureable. Yet we believe the set of criteria
which is now defining 3M’s success are undergoing rapid change. Consider the following
structural changes which are providing 3M with a sustainable advantage for continued
above-average long-term growth:

    1) Pronounced improvement in net ROTC – 3M has historically always generated
       one of the highest relative net ROTC (total equity capital plus net debt) within
       our Global Industrial Infrastructure universe. For the trailing four quarters, 3M
       has averaged a net ROTC of 17.6%, but during 1Q10, this jumped to 30.3%, a
       72% gain. What this means is 3M is currently leveraging not only a lower cost
       structure but it has also become dramatically more capital efficient. This
       generates a double benefit – the company generates more incremental cash to
       reinvest to further enhance its long-term growth initiatives, and it is able to grow
       far more capital efficiently. No wonder MMM’s CEO notes that the best and
       number one use of the company’s incremental FCF is to reinvest it directly into
       the business to spur further long-term growth – share repurchase returns capital
       to shareholders cost effectively, but it doesn’t enhance the long-term growth
       potential of a company. Since MMM is currently able to generate net ROTC
       equal to almost 3X its estimated cost of capital, funding new local R&D centers
       around the world, expanding sales, marketing and promotion budgets to spur
       incremental market share growth in a rapidly growing markets and make
       selective complementary acquisitions all seem destined to enhance the
       company’s near-intermediate term competitive advantage and long-term growth
       potential. Importantly, while the benefits of this are not exponential, they are
       multiplicative and not simply linear (the historical approximate relationship
       between value creation to revenue growth).


                                                                                                   Page 2
3M CO. (NYSE: MMM)                                                                        April 28, 2010

  2) 3M is not burdened by extensive legacy costs – While most companies have
     dramatically (some more draconian than others) reduced their cost structures,
     they continue to be burdened by past legacy costs (environmental, litigation and
     other underfunded long-term obligations). As a result, the incremental
     improvement in 3M’s FCF (which was record in 1Q10 for any quarter in the
     company’s history despite non-record sales) is able to virtually be entirely
     directed to returning capital to shareholders as well as reinvested in the company
     with the singular goal of enhancing 3M’s long-term level of sustainable growth
     (there are no “capital leaks” of measureable significance in 3M’s business model
     today).
  3) 3M is fortunate to possess an “average” 29% global footprint for Emerging
     Market revenues – This “center of gravity” for global revenues is derived in
     more rapidly growing (approximately 3X the growth rates of Developed
     Economies) Emerging Markets where 3M’s current market shares on average
     are estimated to be only 25%-35% of the company historically leading market
     shares in most Developed Economies. Last we checked, 3M sells products
     currently in approximately 120 countries around the world – its reach is not
     overly concentrated in a few large rapidly growing countries but rather has been
     able to systemically permeate the vast majority of Developed and Emerging
     Economies around the world. In March 2010, sales growth in 16 of these
     countries exceeded year earlier levels by over 50%. 3M’s 1Q10 sales in China
     rose 63%, Korea 74% and Taiwan 88% from 1Q09. Sales growth rates this high
     across such a broad swath of countries can’t simply be attributable to stronger
     local GDP growth. As such, investing in local R&D centers to develop new and
     modify existing products to more optimally meet the needs of local customers in
     effect “turbo charges” the above-average growth the company can derive from
     the same incremental investment in its Developed Markets where its market
     shares are typically far more significant. Other than capital misallocation,
     mismanagement or a breakdown in the company’s innovation execution, the real
     “wall” that will eventually slow 3M’s relative growth rate is when its market
     shares in Emerging Economies begin to match those in its Developed Economy
     markets. We would expect that won’t occur on a widespread basis for at least 5
     years and potentially 7-8 years or more. Sure, the growth rates in Emerging
     Markets could slow, but the reality is Emerging Markets are currently growing
     faster than Developed because a larger share of their population is now entering
     the Middle Class. For a manufacturer of consumables such as 3M, this is an
     exceptional force-multiplier for the company’s underlying sales growth rate in
     Emerging Markets. When one compares the cost for 3M to generate an
     incremental dollar of growth in Developed Markets (where the velocity of a
     country’s capital is likely to now slow as standards of living are no longer
     rapidly rising) versus Emerging Markets, there are very few companies that are
     likely to achieve such broad participation in markets with accelerating money
     supply velocity as 3M in Emerging Economies. Put another way, a world class
     scouring pad likely costs less to locally modify for hard water conditions
     compared to the cost to develop a pocket-sized digital LCD projector for
     Developed Markets.
  4) 3M has structurally altered how it establishes preeminence in rapidly growing
     markets – Historically, 3M has sold its products to users of consumables
     through a vast array of distribution channels developed around the world. It has
     also sold its products to OEM manufacturers to insure their inclusion on
     manufactured products. Over the past few years, 3M has begun to shift its core
     focus to work far more closely with the design and engineering companies that
                                                                                               Page 3
3M CO. (NYSE: MMM)                                                                        April 28, 2010

     market technology rather than the companies to which they outsource their
     manufacturing. By developing technology that advances the functionality of
     original products collectively with the design, engineering and marketers of new
     technology, 3M’s products are now increasingly specified by the designer to the
     contract manufacturer. This ensures a far more stable, less volatile demand for
     the company’s most advanced technology enabling products. While it requires
     continual upgrading and improvement to sustain the relationship with the design
     and engineering companies by 3M, it also acts to reduce the historical price
     competitiveness that can far more quickly emerge when supplying contract
     manufacturers, whose principal goal is to minimize costs rather than maximize
     innovative product functionality. The newly emerging 3-D televisions are a
     prime example where 3M actually worked with 3D TV consumer electronics
     companies to develop the critical optics to enable home 3D TV sets. The
     consumer electronics companies now specify 3M’s critical optical films to the
     contract manufacturer. In essence, a new degree of OEM product continuity (in
     return for 3M’s continued commitment to perpetual functionality enhancement)
     for many of 3M’s products is now emerging that previously was contingent first
     on cost and second on product functionality. By locally co-developing and
     producing critical products near contract design & engineering companies and
     their contract manufacturers, 3M is able to offer shorter lead-times from
     development to commercialization than many of its competitors, giving it a
     further edge to gain market share and improve net price realization. Much like
     Apple (AAPL-$262.04-Not Rated) has used optimal consumer design and
     functionality to introduce and sell consumer electronics (think iPad) whose clear
     need may yet not be fully understood by consumers (especially prior to the
     widespread availability of consumer application software to solve problems for
     which consumers never knew a need existed), 3M is similarly developing a
     reputation currently for being the most innovative source of enhanced
     functionality for many new product fields – a fundamental source for high
     quality, advanced innovation which forms the core of the value proposition for
     the design and engineering company’s new product. As the evolution of how
     3M provides value continues to progress, the value of 3M’s burgeoning sales
     and FCF to reinvest back into its business becomes an ever more powerful
     competitive differentiator versus its competitors. This isn’t to say everything 3M
     will soon develop and sell will be nanotechnology that we never see or purchase
     off the shelf of a store, but clearly 3M’s role as a purveyor and accelerator of
     competitive advantage for its customers rather than simply a low cost provider
     of end products marketed on a pyramid of good, better and best customer market
     segmentation strategies is rapidly changing. Importantly, as 3M changes how it
     develops and sells competitive advantage, 3M’s historical close historical
     correlation of the demand for its products with the local GDP growth of the
     markets in which it operates is becoming less and less codependent.




                                                                                               Page 4
3M CO. (NYSE: MMM)                                                                    April 28, 2010




                              Sterne Investment Insights
   1.   Investment Case: One of the best run global industrials with rapidly
        accelerating prospects to enhance its long term growth rate, which over
        the past year has resoundingly banished previous memories of an
        extended series of quarterly disappointments. 3M is no longer as likely to
        surprise based solely on a lower than expected cost structure but rather
        increasingly due to expanding organic revenue growth potential by
        changing how it has evolved as a purveyor of enhanced functional
        content to customers’ products.
   2.   Biggest Misperceptions: Now that operational execution has managed to
        overcome a previously adverse macro environment, the path to further
        EPS recovery may not be linear. In fact, the combination of exceptional
        cost structure retooling and a multiplicative series of accelerated global
        growth initiatives has resulted in an initial almost exponential
        improvement in 3M’s earnings growth and capital efficiency. The key
        variable looking forward (regarding expansion in 3M’s relative valuation)
        is how well organic revenue growth can sustainably improve independent
        of local GDP in the multitude of countries where 3M operates.
   3.   Areas of Greatest Internal Operating Surprise: Stronger organic
        revenue growth from new product introductions, expanded Emerging
        Market sales footprint and continued local adaption of leading products in
        Developed Economies modified to optimally to meet the needs of
        Emerging Economies. Historical seasonal patterns are thus likely to be
        distorted or even shift during the global economy’s unusually pronounced
        but potentially uneven recovery.
   4.   Potential Biggest External Positive: Continued above-average GDP
        growth in Emerging Markets. Continued strong USD could soon become
        a moderate headwind for 3M’s profits with > 68% of 3M’s sales being
        derived from outside US; however, a weaker value for the USD may not
        result in a corresponding historical translation benefit due to significant
        expansion from prior economic recoveries in the geographic locations of
        3M’s global cross-country matrix of production and sales (more now
        outside the US).
   5.   Potential Biggest External Negative: The potential for price/cost
        margin compression as raw material input costs begin to accelerate in
        2010. We believe 3M’s laser focus on sustaining its cost/price inflation
        spread should diminish operating cost performance as a key variable it
        has been over last 18-24 months. Looking into 2H10, the potential for a
        pronounced deceleration in global GDP growth (particularly in NA)
        appears to be a growing possibility that must be overcome with build-out
        of 3M’s global footprint into faster growing regional economies.




                                                                                           Page 5
3M CO. (NYSE: MMM)                                                                                                                                                                   April 28, 2010

Figure 1: MMM 2-Year FY1 P/E & P/E Relative to S&P 500
       3M Co. (MMM )
       MMM 88579Y101 2595708 NYSE                 Common stock
       25-Apr-2008 to 27-Apr-2010 (Daily)                                                                              Average: 14.4 High: 18.6 Low: 9.8 Latest: 16.7
                                                                                                                                                                           20
              Price to Earnings - FY1



                                                                                                                                                                           18



                                                                                                                                                                           16




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                                                                                                                                                                           10




                                                                                                                                                                           8
                                                                                                                      Average: 0.94 High: 1.13 Low: 0.74 Latest: 1.12
                                                                                                                                                                           1.2
              Price to Earnings - FY1 - Relative to S&P 500




                                                                                                                                                                           1.1




                                                                                                                                                                           1




                                                                                                                                                                           0.9




                                                                                                                                                                           0.8




                                                                                                                                                                           0.7
                             7/08               10/08                  1/09         4/09         7/09         10/09                     1/10                 4/10
Data So u rce: F a ctS et E stim a tes,                                                                                                              ©Fa ctS et R esea rch Systems




Source: FactSet estimates



Figure 2: MMM 10-Year FY1 P/E & P/E Relative to S&P 500
       3M Co. (MMM )
       MMM 88579Y101 2595708 NYSE                 Common stock
       28-Apr-2000 to 27-Apr-2010 (Monthly)                                                                           Average: 19.4 High: 27.6 Low: 10.9 Latest: 16.7
                                                                                                                                                                           30
              Price to Earnings - FY1

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                                                                                                                                                                           10
                                                                                                                      Average: 1.13 High: 1.49 Low: 0.73 Latest: 1.12
                                                                                                                                                                           1.6
              Price to Earnings - FY1 - Relative to S&P 500

                                                                                                                                                                           1.5


                                                                                                                                                                           1.4

                                                                                                                                                                           1.3


                                                                                                                                                                           1.2


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                                                                                                                                                                           0.9


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                                                                                                                                                                           0.6
           '00                            '01     '02            '03          '04          '05          '06    '07                '08               '09
Data So u rce: F a ctS et E stim a tes,                                                                                                              ©Fa ctS et R esea rch Systems




Source: FactSet estimates




                                                                                                                                                                                          Page 6
3M CO. (NYSE: MMM)                                                                                                                          April 28, 2010

Figure 3: Boomerang Through 2010 ?
 
          Recent Focus – Blue Sky Cyclical                                                                     New Focus – Tempered Growth
              Recovery Extrapolation
                                                                                                           •Financial Strength  and Flexibility
                                                                                                           •Ability to Create Valuation  in Nominal Revenue 
       •2012 Potential Cyclical Recovery                                                                   Growth Environment
       •Ability to Leverage Improved Cost Base
       •Developed & Emerging Market Potential
                                                          2010 Expectations                                •Industry Consolidation  Opportunities
                                                                                                           •Emerging Market Growth




               What Investors                    Long Range Extrapolation       Adjustment/Reassessment             What Investors
               Have Discounted                                                                                      May See in 2010
                   in 2009                                                                    Temporary Cost Cuts Return
                                                                        BTB Sensitive
                          Anticipated FX Tailwind                        Diversified
                                                                                                           Higher Taxes
                                                                         Industrials

                                                              BTB                           GDP
                Radical Restructuring                     Commodity                       Sensitive                Stubborn Unemployment
                                                            Sensitive                    Industries
                                                           Industries
                                                                                                                           Rising Interest Rates
                                                                                                       Cyclical
                                              Cyclical
                                                                                                      Industries
     Corporate Resizing                      Industries
                                                                                                                                   FX Headwind?
                                   GDP
                                                                                                           Non-Res Con/
                                 Sensitive
                                                                                                            Comm’l Fin
                                Industries


                    2009
                                                                                                                                         2011


Source: Sterne, Agee & Leach, Inc. Estimates

Key Considerations That Appear Likely To Influence Possible Rotation Within
Industrial Stocks Over Next 3-6 Months

Change Is In The Air – Switching From Cyclical Recovery Analytics To Ongoing
Operational Assessment Can Result In Re-Thinking Stock Selection - So far this year,
Industrials have been one of the best performing segments of the market, driven by
several quarters of positive operating profitability improvement and more recently the
extrapolated leverage from revenue growth reacceleration. Now, however, several issues
have emerged on the horizons that are beginning to shift investor analytics from “how
high” to perhaps closer to “how long”. In addition to some operational headwind factors
now coming into view, valuation metrics are also causing us to believe modifications in
stock selection may also emerge.

Operationally, three issues with varying degrees of tangibility have emerged over the past
few months: (a) higher input (especially steel) costs – the decision to by iron ore
producers to move to quarterly rather than annual contracts has suddenly made the
prospect of a potential 30% increase in steel costs in the near future perhaps unavoidable;
(b) rising FX headwinds – the extent of the challenges associated with minimizing the
risks for the sovereign debt problems in Europe have increased the probability that the
EURO is likely to remain under pressure. This could prove particularly relevant if US
short-term interest rates begin to rise in the near-intermediate term. The resulting could
be an operational headwind for most of our US global industrials and a tailwind for many
of our European global industrials; (c) rising US interest rates – while still unclear
exactly when and how much, US interest rates will invariably rise, though operationally
                                                                                                                                                      Page 7
3M CO. (NYSE: MMM)                                                                             April 28, 2010

this should pose the least risk to global industrials given their very strong financial
condition, nominal leverage and strong cash flows.

We believe we may be rapidly closing in on further stock selection changes for Industrial
stocks, with a possible bias emerging that favors lower P/E names, particularly in the
Multi-Industry and Building, Power, Water & Smart Grid sub-sectors. The challenge for
investors in more economically sensitive industrial cyclical stocks will be to know when
to anticipate the arrival of likely tempered enthusiasm as several critical events begin to
emerge that will almost certainly impact global GDP growth beginning perhaps about
mid 2H10, including:

2010 Second Half Headwinds:

1.   Higher manufacturing input costs – The rapid increase in commodities that began
     in late 4Q08 and which accelerated throughout 2009 is likely to begin to squeeze
     sharply improved operating margins which are expected to benefit from
     exceptionally pervasive cost restructuring (1H10) and initial distribution channel
     replenishment (1H10). The biggest challenge could be rising steel costs as the
     industry prepares to shift to 90-day contracts which will be reset four times each
     year. With recent iron prices now rising 80%-90%, the potential exists for steel
     prices to rise as much as 30% over the next few quarters. Steel presents unusual
     challenges since as a manufactured product it is not able to be hedge like other
     commodity costs. The key will be the degree to which companies can offset higher
     steel costs with incremental price increases, particularly as industrial aggregate
     demand is now just barely beginning to recover in many markets to adequately
     enable higher prices to cover higher input costs. Previously, favorable FX was a key
     offset, but beginning in 2Q10 and likely accelerating during 2H10, FX is likely to
     swing to a moderate headwind for most US-based global industrials (it will likely be
     swing to a modest positive for European-based global industrials), assuming the
     USD’s recent strength (particularly versus the Euro) is sustained.

2.   Negative impact of a strong USD post 1Q10 – More Volatile FX (Euro) Pending
     Resolution Of EU Sovereign Debt Issues – Greece’s fiscal problems may prove to
     be more complicated than realized. The proposed EU and IMF “backstops” may not
     be viable as the IMF normally prescribes currency devaluation as one of its
     prescriptions for debt detoxification. Of course, Greece currently can’t devalue as its
     currency since it uses the EURO as part of the EU. Additionally, further likely IMF
     austerity measures could aggravate social unrest. Depending on what’s ultimately
     devised with IMF & EU, it is possible Greece could be kicked out of the EU if a
     viable solution can’t be quickly developed and implemented that avoids continued
     escalating borrowing costs for Greece. If Greece reverts back to its own currency, it
     could cause $38B of Greek debt to potentially default (likely impacting German
     banks most severely). Were this to occur, Greece’s (presumably temporary) removal
     from the EU could be followed by others (Spain, Italy, Portugal, Ireland) until they
     rectify their finances. We sense this could put further pressure on the EURO lower
     vs. the USD though eventually the EURO should recover – and the USD could come
     under pressure for doing the same thing. With US interest rates poised to rise well
     before the EU’s, this could also put further pressure on the EURO. The average US
     Industrial derives about 20%-25% of their sales from Europe, so while FX may start
     2010 as a tailwind, it’s likely to become a headwind quite rapidly as the value of
     their overseas earnings, which are now a larger percentage of total earnings than in
     the past, declines. Near-term a weak EURO would help our foreign global multi-
     industry names. Bottom-line: look for increased FX volatility to impact earnings.

3.   Rising state and local tax rates in N.A. – In 2009, state and local municipal
     governments received approximately $350-$375 billion from the U.S. 2009 Stimulus
     Program to sustain local services. This transfer should enable local governments to
                                                                                                    Page 8
3M CO. (NYSE: MMM)                                                                                April 28, 2010

     sustain services rather than increase local government spending for vital community
     services. In 2010, these funds will have to be replaced by higher taxes, as local and
     state governments are not allowed to deficit finance their operating budgets, in our
     opinion. This is likely to lead to slower economic growth in N.A. as consumers
     experience a higher tax burden and if anything, local services face potential partial
     curtailment. Federal tax reform (both corporate and individual) could also emerge in
     Congress during 2010 and potentially could be implemented as early as 2011.

4.   Higher interest rates in N.A. – At some point, the Federal Reserve will begin to
     raise interest rates. While the catalysts behind such a move and its timing have been
     extensively debated, once interest rates begin to climb, Federal Reserve officials
     have repeatedly warned that the rate of increase is likely to be steeper than the last
     interest rate cycle earlier this decade. Such an increase is likely to make assumptions
     about rebounding construction (both Residential in 2010 and Non-Residential in
     2011) be viewed in a more conditional manner. While US long-term interest rates
     have been rising since early December, there is growing realization that at some
     point short-term interest rates are likely to also rise. Over the past few quarters
     commodity-based economies (Australia, Canada, Brazil, etc.) have been raising their
     short-term borrowing rates. While the exact timing and pace of any US interest rate
     increases is less clear, quantitative easing measures have now been ended. For most
     global industrials, their financial condition has rarely been stronger (particularly after
     emerging from one of the most several global economic downturns on record). As
     such, operationally higher interest rates are likely to be less of a concern for global
     industrials than their impact on discounting the value of future improved earnings in
     share prices.

5.   Prospective June 2010 end to U.S. government’s extension of first-time homebuyer
     credit – Weakness could re-emerge in N.A. home sales following the expected
     conclusion of the government’s first-time homebuyer incentive program. It has been
     estimated that approximately 35% of the homes bought in the U.S. since the
     program’s inception were purchased through the incentive program. Similar to the
     end of the government’s cash-for-clunkers program, the end of this incentive could
     negatively impact companies with significant residential new home sales exposure.
           
6.   Capital Redeployment Rewarded Most For Acquisitions That Increase Exposure to
     Emerging Markets – Companies that opt to use their overall stronger balance sheets
     to make acquisitions in Developed (and much likely slower growing markets) can
     expect a less ebullient investor response than those that figure out how to form JVs
     or make acquisitions that increase their exposure in “the next” Emerging Markets
     (India, South America). Similarly, those that opt to return cash via share repurchase
     (rather than dividends) could find investors questioning if a real plan exists to shift a
     company’s global “center of sales gravity” to higher growth Emerging Markets.

7.   Key Industrial Growth Drivers Next Five Years – rather than a historical extensive
     use of share repurchase, the primary sources of growth and strategic value creation
     for global industrials (beyond cyclical market recovery and operational and portfolio
     restructuring) are likely to be increasingly influenced by:

         a) Shift revenue “center of gravity” to faster growing Emerging Markets
            (higher organic revenue growth)
         b) Expand intellectual/data/information content – aftermarket monitoring,
            predictive maintenance, software upgrades, energy savings (higher organic
            revenue growth and enhanced ROTC)
         c) Expand aftermarket physical content – parts, overhaul, general maintenance
            and repair (higher organic revenue growth, potentially improved ROTC)
         d) Exit marginal product lines and businesses (enhanced ROTC, potentially
            improved organic revenue growth)
                                                                                                       Page 9
3M CO. (NYSE: MMM)                                                                                                                                                                                                                                                                                                                  April 28, 2010


2010 Conceptual Changes Potentially Affecting Industrial Valuations:

Conceptually, there are several other tell-tails that could also distract attention from the
recent sole focus on extrapolating how high fundamentals will improve and how quickly
this can be accomplished:

The Institute For Supply Management (ISM) Index is near all-time highs – as noted in
the chart below, readings above 60 (currently 59.6) have tended to correlate with peaks in
the expansion of forward one-year P/Es for the market. Essentially, the future discounting
of mechanism used by investors begins to switch from discounting expected future
fundamental improvement to reflect near-term macro-economic changes that can impact
near-term operating performance as well as adjust the discount rate used to determine the
present value of future extrapolated fundamental operating expectations;

                                                                                      Correllation of ISM & S&P500 FY1 P/E Multiple
                            70.00                                                                                                                                                                                                                                                                                  30.0



                            60.00
                                                                                                                                                                                                                                                                                                                   25.0


                            50.00
ISM Index (+50=Expansion)




                                                                                                                                                                                                                                                                                                                   20.0

                            40.00




                                                                                                                                                                                                                                                                                                                          FY1 P/E
                                                                                                                                                                                                                                                                                                                   15.0

                            30.00

                                                                                                                                                                                                                                                                                                                   10.0
                            20.00


                                                                                                                                                                                                                                                                                                                   5.0
                            10.00



                             0.00                                                                                                                                                                                                                                                                                  0.0
                                                      Dec‐00




                                                                                 Dec‐01




                                                                                                            Dec‐02




                                                                                                                                       Dec‐03




                                                                                                                                                                   Dec‐04




                                                                                                                                                                                              Dec‐05




                                                                                                                                                                                                                         Dec‐06




                                                                                                                                                                                                                                                    Dec‐07




                                                                                                                                                                                                                                                                               Dec‐08




                                                                                                                                                                                                                                                                                                          Dec‐09
                                             Aug‐00




                                                                        Aug‐01




                                                                                                   Aug‐02




                                                                                                                              Aug‐03




                                                                                                                                                          Aug‐04




                                                                                                                                                                                     Aug‐05




                                                                                                                                                                                                                Aug‐06




                                                                                                                                                                                                                                           Aug‐07




                                                                                                                                                                                                                                                                      Aug‐08




                                                                                                                                                                                                                                                                                                 Aug‐09
                                    Apr‐00




                                                               Apr‐01




                                                                                          Apr‐02




                                                                                                                     Apr‐03




                                                                                                                                                Apr‐04




                                                                                                                                                                            Apr‐05




                                                                                                                                                                                                       Apr‐06




                                                                                                                                                                                                                                  Apr‐07




                                                                                                                                                                                                                                                             Apr‐08




                                                                                                                                                                                                                                                                                        Apr‐09




                                                                                                                                                         ISM                 S&500 FY1 P/E

Source: ISM and FactSet historical data and estimates

FCF/Net Income begins to normalize – during cyclical downturns, working capital and
capital expenditures contract, resulting in sharply higher FCF/NI ratios. For our Multi-
Industry Global Industrial Infrastructure Sub-Sector universe (excluding GE), the FCF/NI
ratio rose to 1.65 in 2009 from 1.15 in 2008 but is projected to moderate to 1.07 in 2010E
and 0.96 by 2011E, reflecting increased working capital and increased capital spending as
the global economy recovers. These changes can be even more extreme for smaller
capitalization industrials. For our Building, Power, Water & Smart Grid Sub-Sector,
FCF/NI ratio rose to 3.06 in 2009 from 1.61 in 2008 but is projected to decline to 1.22 in
2010E and 0.99 in 2011E. When this normalization of the FCF/NI ratio occurs, industrial
stocks no longer appear as inexpensive based on cash flow multiples;

What could overcome the emergence of these new operational and conceptual factors that
could change stock selection and temper valuation metrics? We believe there are two
principal factors currently: (1) sharply stronger than expected organic revenue growth
which would (at least near-term) result is significantly greater operating earnings that
could “reset” fundamental expectations higher than previously anticipated or discounted;
(2) significant M&A activity which could unlock undiscounted value or alter current P/E
valuations presently assigned to a company’s existing business portfolio.




                                                                                                                                                                                                                                                                                                                                         Page 10
3M CO. (NYSE: MMM)                                                                                                                                                                                                                  April 28, 2010
3M Company—Summary Financial Statements 2004-2010E
(Dollars and shares in millions, except per-share data)


INCOME STATEMENT                                           2004                         2005                          2006                          2007                          2008                          2009                           2010E
                                                                    Oper.                         Oper.                        Oper.                         Oper.                         Oper.                          Oper.                         Oper.
Revenues                                          Sales             Profits    Sales             Profits    Sales              Profits    Sales              Profits    Sales              Profits    Sales               Profits     Sales             Profits
   Industrial & Transportaion                    $5,711             $1,050    $6,144             $1,211    $6,997              $1,421    $7,692              $1,599    $8,294              $1,634    $7,232               $1,347     $8,537             $1,810
   Health Care                                   $3,596              $973     $3,760             $1,114    $4,025              $1,175    $3,980              $1,093    $4,303              $1,235    $4,294               $1,370     $4,571             $1,389
   Display and Graphics                          $3,346             $1,115    $3,511             $1,162    $3,758              $1,078    $3,916              $1,115    $3,268               $625     $3,132               $612       $3,747              $856
   Consumer & Office                             $2,901              $514     $3,033              $561     $3,254              $651      $3,494               $710     $3,578               $701     $3,471               $761       $3,815              $819
   Electro & Communications                      $2,224              $316     $2,333              $447     $2,696              $474      $2,805               $542     $2,835               $547     $2,276               $333       $2,586              $488
   Safety, Security and Protection               $2,125              $465     $2,292              $537     $2,556              $548      $2,891               $602     $3,330               $727     $3,064               $726       $3,298              $743
   Corporate and Unallocated                      $108              ($107)      $94               ($178)     $45                ($84)      $79                ($62)      $22                $97        $12                 ($62)      $17               ($143)
   Elimination of Dual Credit                      $0                 $0        $0                 $0       ($408)              ($90)     ($395)              ($87)     ($361)              ($79)     ($358)               ($79)     ($402)              ($82)
Total                                           $20,011             $4,326    $21,167            $4,854    $22,923            $5,173     $24,462             $5,512    $25,269             $5,487    $23,123             $5,008     $26,169             $5,880


Pretax Income                                    $4,303                       $4,828                       $5,102                        $5,434                        $5,377                        $4,826                          $5,712
Taxes                                            $1,400                       $1,574                       $1,492                        $1,964                        $1,588                        $1,496                          $1,601
Extraordianry Items                                $0                          ($75)                        $74                           ($445)                        ($180)                        ($88)                            $0
M inority Interest                                 $62                          $55                          $51                           $55                           $60                           $51                            $61
Net Earnings Incl. Gains/Charges                 $2,841                       $3,124                       $3,633                        $2,970                        $3,549                        $3,191                          $4,050
After Tax Gains/Charges                            $0                          ($75)                         $74                          ($445)                        ($180)                        ($88)                            $0
Net Income                                       $2,841                       $3,049                       $3,559                        $2,525                        $3,729                        $3,279                          $4,050


Diluted EPS - Ongoing Operations                  $3.56                        $4.12                        $4.58                         $4.67                         $5.27                         $4.64                          $5.60
Diluted EPS - Including Unusuals                  $3.56                        $4.02                        $4.58                         $4.06                         $5.02                         $4.52                          $5.60


Diluted Shares Outstanding                         797                          778                          760                           732                           707                           707                            724
Quarterly Earnings
                 Q1                               $0.90                        $0.97                        $1.20                         $0.96                         $1.38                         $0.81                           $1.40
                 Q2                               $0.97                        $1.06                        $1.12                         $1.22                         $1.39                         $1.20                           $1.46       E
                 Q3                               $0.97                        $1.06                        $1.19                         $1.28                         $1.42                         $1.38                           $1.41       E
                 Q4                               $0.91                        $1.01                        $1.10                         $1.20                         $1.08                         $1.30                           $1.33       E


CASH FLOW                                                  2004                         2005                          2006                          2007                          2008                          2009                           2010E


Sources
Net Income                                                $2,841                        $3,049                       $3,485                        $4,096                        $3,460                        $3,191                         $4,050
Depr. & Amort.                                             $999                         $986                         $1,079                        $1,072                        $1,153                         $900                           $950
Change in W.C.                                              $98                         ($365)                       ($344)                         ($93)                         ($33)                        $2,145                          ($250)
Deferred Income Tax                                        $243                         $132                         ($316)                         $11                           $118                          ($150)                          $65
Pension Contibution                                        ($324)                       ($351)                        $55                           ($124)                         $0                           ($85)                          ($50)
Other                                                      $371                         $678                          ($58)                         ($687)                        ($165)                       ($1,060)                        $250
From Operations                                           $4,228                       $4,129                        $3,901                        $4,275                        $4,533                        $4,941                         $5,015


Dispositions                                                $0                           $0                          $1,209                         $897                           $0                            $0                            $250
Net Debt                                                   ($111)                       ($485)                       $1,135                        $1,222                        $1,037                        ($1,014)                         $0
Effect Of Exchange Rate On Cash                            $111                          ($23)                        $57                           $88                           ($415)                         ($4)                           $50
Other - Net                                                 $45                         ($114)                         $8                           $54                           ($63)                         $17                             $0
Total Sources                                             $4,273                       $3,507                        $6,310                        $6,536                        $5,092                        $3,940                         $5,315


Uses
Capital Expenditures—Net                                   $868                         $902                         $1,119                        $1,319                        $1,471                         $903                          $1,000
Dividends                                                 $1,125                        $1,286                       $1,376                        $1,380                        $1,398                        $1,431                         $1,500
Investments-Net                                             $3                           ($46)                        $662                          $303                          ($466)                        $760                           $200
Business Acquisitions—Net                                   $73                         $1,293                        $888                          $539                         $1,394                         $69                            $450
Net Equity - Net                                          $1,283                        $1,832                       $1,828                        $2,443                        $1,342                         ($414)                          $0
Total Uses                                                $3,352                       $5,267                        $5,873                        $5,984                        $5,139                        $2,749                         $3,150


Change In Cash                                             $921                        ($1,760)                      $437                           $552                          ($47)                        $1,191                         $2,165


CAPITALIZATION                                             2004                         2005                          2006                          2007                          2008                          2009                           2010E


Short-Term Debt                                           $2,094                        $1,072                       $2,506                         $901                         $1,552                         $613                           $463
Long-Term Debt                                             $727                         $1,309                       $1,047                        $4,019                        $5,166                        $5,097                         $5,097
Shareholders' Equity                                      $10,378                      $10,395                       $9,959                        $11,747                       $10,304                       $13,302                        $13,302
Total Capitalization                                      $13,199                      $12,776                      $13,512                       $16,667                       $17,022                       $19,012                         $18,862


Cash & Equivalents                                        $2,757                        $997                         $1,435                        $1,987                        $1,940                        $3,131                         $5,296
3-Year Avg. Cash Return to Shareholders                      --                           --                         93.0%                         95.8%                         88.1%                         68.1%                           49.4%
Cash Return to Shareholders                                84.8%                        102.2%                        91.9%                         93.3%                         79.2%                         31.9%                          37.0%


Debt/Total Capital                                         21.4%                        18.6%                         26.3%                         29.5%                         39.5%                         30.0%                          29.5%
Net Total Capital                                         $10,442                      $11,779                       $12,077                       $14,680                       $15,082                       $15,881                        $13,566
Net Debt/Total Capital                                     0.5%                         10.8%                        15.7%                         20.5%                         28.1%                         13.6%                           1.4%


Average ROE                                                31.1%                        29.4%                         34.2%                         37.7%                         31.4%                         27.0%                          30.4%
Average ROTC                                               23.7%                        23.5%                         26.5%                         27.1%                         20.5%                         17.7%                          21.4%
Average Net Capital                                        $8,644                      $11,110                       $11,928                       $13,379                       $14,881                       $15,482                        $14,723
Average Net ROTC                                           32.9%                        27.4%                        29.8%                         18.9%                         25.1%                         21.2%                           27.5%




Source: 3M Company and Sterne, Agee & Leach, Inc. estimates.




                                                                                                                                                                                                                                              Page 11
3M CO. (NYSE: MMM)                                                                                                                                                                                  April 28, 2010

 3M Company—Sales And Earnings Model 2004-2011E
   (Dollars and shares in millions, except per-share data)


Revenues                                    2004        % Change       2005     % Change    2006     % Change    2007     % Change    2008     % Change    2009     % Change    2010E    % Change    2011E     % Change
   Industrial & Transportation             5,711             11.3%     6,144      7.6%      6,997     13.9%      7,692      9.9%      8,294      8.0%      7,232     -12.8%     8,537     18.0%      9,220       8.0%
   Health Care                             3,596             4.8%      3,760      4.6%      4,025      7.0%      3,980     -1.1%      4,303      9.0%      4,294     -0.2%      4,571      6.4%      4,936       8.0%
   Display & Graphics                      3,346             17.1%     3,511      4.9%      3,758      7.0%      3,916      4.2%      3,268      7.0%      3,132     -4.2%      3,747     19.6%      3,972       6.0%
   Consumer & Office                       2,901             9.8%      3,033      4.6%      3,254      7.3%      3,494      7.4%      3,578      6.0%      3,471     -3.0%      3,815      9.9%      4,006       5.0%
   Electro & Communications                2,224             5.9%      2,333      4.9%      2,696     15.6%      2,805      4.0%      2,835      8.5%      2,276     -19.7%     2,586     13.6%      2,715       5.0%
   Safety, Security & Protection           2,125             10.2%     2,292      7.9%      2,556     11.5%      2,891     13.1%      3,330     12.0%      3,064     -8.0%      3,298      7.6%      3,661      11.0%
   Corporate & Unallocated                  108              -23.4%     94       -13.0%      45       -52.1%      79       75.6%       22       -72.2%      12       -45.5%      17       41.7%       (20)
   Elimination of Dual Credit                0                           0                  (408)                (395)                (361)                (358)                (402)                (350)
Total Revenue                             $20,011            9.8%     $21,167     5.8%     $22,923     8.3%     $24,462     6.7%     $25,269     3.3%     $23,123    -8.5%     $26,169    13.2%     $28,140      7.5%


Operating Margins
   Industrial & Transportation              18.4%                      19.7%                20.3%                20.8%                19.7%                18.6%                21.2%                22.2%
   Health Care                              27.1%                      29.6%                29.2%                 n/a                 28.7%                31.9%                30.4%                31.2%
   Display & Graphics                       33.3%                      33.1%                28.7%                28.5%                19.1%                19.5%                22.8%                23.5%
   Consumer & Office                        17.7%                      18.5%                20.0%                20.3%                19.6%                21.9%                21.5%                22.5%
   Electro & Communications                 14.2%                      19.2%                17.6%                19.3%                19.3%                14.6%                18.9%                20.2%
   Safety, Security & Protection            21.9%                      23.4%                21.4%                20.8%                21.8%                23.7%                22.5%                23.0%
Total Operating Margin                     21.6%                       22.9%                22.6%                22.5%                21.7%                21.7%                22.5%                23.8%


Operating Profits
   Industrial & Transportation             1,050             27.6%     1,211     15.3%      1,421     17.3%      1,599     12.5%      1,634      2.2%      1,347     -17.6%     1,810     34.4%      2,047      13.1%
   Health Care                              973              7.3%      1,114     14.5%      1,175      5.5%      1,093     -7.0%      1,235     13.0%      1,370     10.9%      1,389      1.4%      1,540      10.9%
   Display & Graphics                      1,115             28.9%     1,162      4.2%      1,078     -7.2%      1,115      3.4%       625      -43.9%      612      -2.1%       856      39.8%       933        9.1%
   Consumer & Office                        514              17.4%      561       9.1%       651      16.0%       710       9.1%       701      -1.3%       761       8.6%       819       7.6%       901       10.0%
   Electro & Communications                 316              18.8%      447      41.5%       474       6.0%       542      14.3%       547       0.9%       333      -39.1%      488      46.5%       548       12.4%
   Safety, Security & Protection            465              11.8%      537      15.5%       548       2.0%       602       9.9%       727      20.8%       726      -0.1%       743       2.3%       842       13.4%
   Corporate & Unallocated                  (107)            -49.3%    (178)     66.4%       (84)     -52.8%      (62)     -26.2%      97      -256.5%      (62)    -163.9%     (143)     130.6%      (48)      -66.4%
   Elimination of Dual Credit                0                           0                   (90)                 (87)                 (79)                 (79)                 (82)                 (80)
Total Operating Profit                    $4,326             23.5%    $4,854     12.2%     $5,173      6.6%     $5,512      6.6%     $5,487     -0.5%     $5,008     -8.7%     $5,880     17.4%     $6,684      13.7%


Investment & Other Income                    0                          56                   38                   132                  105                  37                   30                   30
Interest Expense                            (23)                        (82)                (109)                (210)                (215)                (219)                (198)                (185)


Pretax Income                             $4,303             21.5%    $4,828     12.2%     $5,102      5.7%     $5,434      6.5%     $5,377     -1.0%     $4,826     -10.2%    $5,712     18.4%     $6,529      14.3%
   Pretax M argin                           21.5%                      22.8%                22.3%                22.2%                21.3%                20.9%                21.8%                23.2%


Provision for Income Tax                   1,400             22.3%     1,574     12.4%      1,492     -5.2%     $1,964     31.7%      1,588     -19.1%    $1,496                1,601                1,893
   Income Tax Rate (%)                      32.5%                      32.6%                29.2%                36.1%                29.5%                31.0%                28.0%                29.0%


M inority Interest                           62                         55                   51                   55                   60                   51                   61                   50


Earnings From Continuing Op's             $2,841             21.2%    $3,199     12.6%     $3,559     11.3%     $3,415     -4.1%     $3,729      9.2%     $3,279     -12.1%    $4,050     23.5%     $4,586      13.2%


Income/(loss) from Extraordinary Items       0                          (75)                 74                  (445)                (180)                 (88)                  0                    0
Net Income                                $2,841             21.2%    $3,124     10.0%     $3,485     11.6%     $2,970     -14.8%    $3,549     19.5%     $3,191     -10.1%    $4,050     26.9%     $4,586      13.2%


Diluted EPS - Ongoing Operations           $3.56             20.9%     $4.11     15.4%      $4.68     13.8%      $4.67     -0.3%      $5.27     13.0%      $4.64     -12.0%     $5.60     20.6%      $6.45      15.2%
Diluted EPS - Including Unusuals           $3.56             20.9%     $4.02     12.7%      $4.58     14.1%      $4.06     -11.5%     $5.02     23.7%      $4.52     -10.0%     $5.60     24.0%      $6.45      15.2%


Shares Diluted (M il)                      797.0                       778.0                760.4                732.0                707.2                706.7                723.5                711.0


                                                                                                                                                                                                              Page 12
Source: 3M Company and Sterne, Agee & Leach, Inc. estimates.
3M CO. (NYSE: MMM)                                                                                                                                                                  April 28, 2010

3M Company—2010E Quarterly Sales And Earnings Model
    (Dollars and shares in millions, except per-share data)


Revenue                                          1Q10           1Q09    % change   2Q10E     2Q09    % change   3Q10E     3Q09    % change   4Q10E     4Q09    % change    2010E       2009    % change
    Industrial & Transportation                 2,073          1,603     29.3%     2,101    1,751     20.0%     2,166    1,934     12.0%     2,197    1,944     13.0%      8,537      7,232     18.0%
    Health Care                                 1,117           997      12.0%     1,150    1,065     8.0%      1,137    1,083     5.0%      1,166    1,149     1.5%       4,571      4,294     6.4%
    Display & Graphics                           869            611      42.2%      986      808      22.0%      986      896      10.0%      907      817      11.0%      3,747      3,132     19.6%
    Consumer & Office                            912            795      14.7%      953      866      10.0%     1,001     923      8.5%       949      887      7.0%       3,815      3,471     9.9%
    Electro & Communications                     665            480      38.5%      645      551      17.0%      642      617      4.0%       634      628      1.0%       2,586      2,276     13.6%
    Safety, Security & Protection                809            672      20.4%      831      769      8.0%       835      831      0.5%       824      792      4.0%       3,298      3,064     7.6%
    Corporate & Unallocated                       5              4                   4        4                   4        4                   4        0                   17         12
    Elimination of Dual Credit                   (102)          (73)                (100)    (95)                (100)    (95)                (100)    (95)                (402)       (358)
Total Revenue                                   $6,348         $5,089    24.7%     $6,569   $5,719    14.9%     $6,671   $6,193    7.7%      $6,581   $6,122    7.5%      $26,169    $23,123    13.2%


Operating Margin
    Industrial & Transportation                  21.9%         12.4%               22.0%    18.9%               21.0%    21.3%               20.0%    20.9%                21.2%      18.6%
    Health Care                                  31.1%         31.2%               31.5%    32.3%               30.0%    31.4%               29.0%    32.6%                30.4%      31.9%
    Display & Graphics                           24.4%         10.8%               24.0%    24.9%               22.0%    22.8%               21.0%    17.3%                22.8%      19.5%
    Consumer & Office                            24.0%         21.0%               22.0%    24.0%               21.0%    24.6%               19.0%    17.9%                21.5%      21.9%
    Electro & Communications                     20.6%          5.0%               18.8%    13.4%               18.0%    19.0%               18.0%    18.8%                18.9%      14.6%
    Safety, Security & Protection                22.4%         19.0%               23.0%    23.3%               22.7%    27.3%               22.0%    24.2%                22.5%      23.7%
Total Operating Margin                           22.8%         17.1%               23.5%    22.6%               22.3%    24.3%               21.3%    21.9%                22.5%      21.7%


Operating Profit
    Industrial & Transportation                  454            198     129.3%      462      331      39.7%      455      412      10.4%      439      406      8.2%       1,810      1,347     34.4%
    Health Care                                  347            311      11.6%      362      344      5.3%       341      340      0.3%       338      375      -9.8%      1,389      1,370     1.4%
    Display & Graphics                           212            66      221.2%      237      201      17.7%      217      204      6.3%       190      141      35.1%      856         612      39.8%
    Consumer & Office                            219            167      31.1%      210      208      0.8%       210      227      -7.4%      180      159      13.4%      819         761      7.6%
    Electro & Communications                     137            24      470.8%      121      74       63.8%      116      117      -1.3%      114      118      -3.2%      488         333      46.5%
    Safety, Security & Protection                181            128      41.4%      191      179      6.7%       190      227      -16.5%     181      192      -5.6%      743         726      2.3%
    Corporate & Unallocated                       (83)           (8)                (20)     (24)                (20)      (2)                (20)     (28)                (143)       (62)
    Elimination of Dual Credit                    (22)          (16)                (20)     (21)                (20)     (21)                (20)     (21)                 (82)       (79)
Total Operating Profit                          $1,445         $870      66.1%     $1,543   $1,292    19.4%     $1,488   $1,504    -1.0%     $1,404   $1,342    4.6%      $5,880      $5,008    17.4%


    Investment & Other Income                     6             11                   8        7                   8        8                   8       11                   30         37
    Interest Expense                              (48)          (55)                (50)     (55)                (50)     (55)                (50)     (54)                (198)       (219)


Pretax Income                                   $1,403          $826     69.9%     $1,501   $1,244    20.7%     $1,446   $1,457    -0.7%     $1,362   $1,299    4.8%      $5,712      $4,826    18.4%
    Pretax Margin                                22.1%         16.2%               22.8%    21.8%               21.7%    23.5%               20.7%    21.2%                21.8%      20.9%
Income Tax                                       $364           $251                $431     $394                $415     $460                $391     $348               $1,601      $1,453
    Income Tax Rate (%)                          25.9%         30.4%               28.7%    31.7%               28.7%    31.6%               28.7%    26.8%                28.0%      30.1%
M inority Interest                               $25            $12                 $12      $9                  $12      $14                 $12      $16                 $61         $51


Earnings From Continuing Op's                   $1,014          $563     80.1%     $1,058    $841     25.8%     $1,019    $983     3.7%       $959     $935     2.6%      $4,050      $3,322    21.9%


    Income/(loss) from Extraordinary Items        (84)          (45)                 0       (60)                 0       17                   0        0                   (84)       (88)


Net Income                                       $930           $518     79.5%     $1,058    $781     35.5%     $1,019   $1,000    1.9%       $959     $935     2.6%      $3,966      $3,234    22.6%


Diluted EPS Adjusted - Ongoing Operations        $1.40         $0.81     73.2%     $1.46    $1.20     21.8%     $1.41    $1.38     1.9%      $1.33    $1.30     2.0%       $5.60      $4.70     19.1%
Diluted EPS GAAP - Including Unusuals            $1.29         $0.74     72.7%     $1.46    $1.12     31.1%     $1.41    $1.41     0.1%      $1.33    $1.30     2.0%       $5.48      $4.58     19.8%


    Shares Diluted (Mil)                          724           696                 724      700                 724      711                 724      720                  724        707
Source: 3M Company and Sterne, Agee & Leach, Inc. estimates.




                                                                                                                                                                                            Page 13
3M CO. (NYSE: MMM)                                                                                                          April 28, 2010

                                                       APPENDIX SECTION
Company Description: 3M Corp. (MMM), is a diversified global technology company producing products and services for the
electronics, communications, industrial, consumer and office, health care, display & graphics, safety & security markets. The
company's businesses share technologies, manufacturing operations, brands, marketing channels, and other resources to maximize
profitability. 3M sells over 58,000 products to customers in over 200 countries located around the world and is one of the most global
diversified industrials, with over 65% of its sales outside the U.S. and 30% in Emerging Economies.

IMPORTANT DISCLOSURES:
Price Target Risks & Related Risk Factors:
Risks to our investment thesis for 3M are three: (1) the extent to which the company's efforts to expand international sales and
revenues in Emerging Markets, aided by expanded new product introductions, can incrementally enhance 3M's growth despite the vast
majority of the company's sales still being derived from slower growth economies in Developed Markets; 3M now believes its organic
revenue growth can grow at 10%-12% (up from 5%-6%) and should benefit from its expanded global geographic footprint versus
prior economic recoveries while its accelerated and expanded R&D investments should begin to sustainably enhance its LT organic
growth; acquisitions funded by strong FCF are likely to contribute another 3%4% to overall revenue growth, enabling 15% EPS
growth or more over the next 3-5 years, up from 10%-11% previously projected; (2) 3M looks well prepared to navigate an estimated
$0.10-$0.20 of higher net price/raw material costs in 2010, though recent continued increases in steel costs could push this headwind
to the higher end of recent guidance; continued improving demand and 3M's focus on managing the price inflation gap will be critical
determinants of the pace of margin improvement throughout 2010; while a weaker USD should be a positive at least initially to help
offset higher input costs, the recent strengthening of the USD means FX is likely to become a moderate headwind beginning in 2H10;
(3) 3M's rapidly accelerated and rejuvenated R&D spending has clearly begun to dramatically improve the company's underlying
organic growth rate; while currently evident, we believe the impact of the company's sharply higher organic growth from the positive
impact of expanded new product development should become more pronounced during 2H10 due to tougher YOY quarterly
comparisons.

Valuation Methodology:
We initiated coverage of 3M Corporation on November 12, 2007, with a Neutral rating. We currently rate 3M shares Buy. Our revised
6-12 month price target is now $102 per share (versus $105 previously, due solely to a decline in the overall market P/E to 14.6X from
15.0X) and is based on our revised 2010E EPS estimate of $5.60 and FactSet's 2010E S&P 500 P/E of 14.6X (up from 15.0X
previously). Our price target assumes 3M's shares trade at a 25% P/E premium to the overall market. FactSet is currently forecasting
2010 S&P 500 earnings of $81.11, resulting in a current year market P/E estimate of 14.6X. During the past 24 months, MMM has
traded at an average 6% P/E discount to the S&P 500, ranging between a 13% relative P/E premium and a 26% relative P/E discount
based on current-year earnings. Over the past decade, MMM has traded at an average 13% P/E premium, ranging between a 27%
discount to the market and a 49% premium relative to the S&P 500 based on current-year EPS. Currently, MMM is trading at an 8%
relative P/E premium to the market based on our current 2010E EPS forecast of $5.60.

Regulation Analyst Certification:
I, Nicholas P. Heymann, hereby certify the views expressed in this research report accurately reflect my personal views about the
subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related to
the specific recommendations or views expressed by me in this report.

Sterne, Agee & Leach, Inc. Disclosure Legend as of April 28, 2010:

            Company                                                                           Disclosure(s) – See Below
            3M Co. (MMM - NYSE):                                                              None

    1.     Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company.
    2.     Sterne, Agee & Leach, Inc. has, over the past 12 months, managed or co-managed a public securities offering or
           provided other investment banking services for the subject company.
    3.     Sterne, Agee & Leach, Inc. has various security accounts open for the subject company.
    4.     Sterne, Agee & Leach, Inc. provides administration for 401(k) plans for the subject company.
    5.     Sterne Agee Financial Services, Inc. has clearing agreements with the subject company.
    6.     The Sterne Agee analyst who has active coverage on this company owns a position in the subject company.
    7.     Sterne, Agee & Leach, Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of the
           subject company.

                                                                                                            Appendix Section, Page I
3M CO. (NYSE: MMM)                                                                                                        April 28, 2010

Sterne, Agee & Leach, Inc.’s research analysts receive compensation that is based upon various factors, including Sterne, Agee &
Leach, Inc.’s total revenues, a portion of which is generated by investment banking activities.

Definition of Investment Ratings:
BUY:                       We expect this stock to outperform the industry over the next 12 months.
NEUTRAL:                   We expect this stock to perform in line with the industry over the next 12 months.
SELL:                      We expect this stock to underperform the industry over the next 12 months.
RESTRICTED:                Restricted list requirements preclude comment.

Ratings Distribution:
Of the securities rated by Sterne, Agee & Leach, Inc., as of March 31, 2010, 43.9% had a BUY rating, 52.3% had a NEUTRAL rating,
3.7% had a SELL rating, and 0% was RESTRICTED. Within those ratings categories, 2.04% of the securities rated BUY, 1.94%
rated NEUTRAL, 0% rated SELL, and 0% rated RESTRICTED received investment banking services from Sterne, Agee & Leach,
Inc., within the 12 months preceding March 31, 2010.

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.

Copyright © 2010 Sterne, Agee & Leach, Inc. All Rights Reserved.

Sterne, Agee & Leach, Inc. disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA
regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the
current quarter, will not be displayed until the following quarter.

Price Chart(s):




To receive price charts or other disclosures on the companies mentioned in this report, please contact Sterne, Agee & Leach, Inc. toll-
free at (800) 966-0814 or (205) 949-3689.




                                                                                                         Appendix Section, Page II
                                                     STERNE, AGEE & LEACH, INC.
                  Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for
                  over a century. During the early years, our founders prominently established themselves in the financial securities
                  industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
                  Agee is headquartered in Birmingham, Alabama with offices in 22 states including Alabama, Arkansas, California,
Florida, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Missouri, New Jersey, New York,
North Carolina, Pennsylvania South Carolina, Tennessee, Texas, Virginia, and Wisconsin. Sterne Agee is one of the largest
independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust
Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial
Services, Inc.—www.sterneagee.com
                                             EQUITY CAPITAL MARKETS ADMINISTRATION
Ryan Medo           Managing Dir., Eq. Cap. Mkts.     (205) 949-3623     David Lee                  Director, Equity Products          (205) 949-3689
Robert Lake         Vice President                    (205) 949-3624     Yan Chao                   Associate                          (205) 949-3622
                                                                         Chuck Carlisle             Sr. Portfolio Analyst              (205) 949-3571

                                                           EQUITY RESEARCH
                                      Robert Hoehn      Director of Research                    (212) 338-4731

CONSUMER                                                                       FINANCIAL SERVICES (CONT.)
 Apparel Retailing & Toys                                                        Mortgage Finance & Specialty Finance
  Margaret Whitfield            SVP, Sr. Analyst      (973) 519-1019             Henry J. Coffey, Jr., CFA       SVP, Sr. Analyst        (615) 760-1472
  Jennifer Milan                VP, Analyst           (212) 763-8211             Jason Weaver                    Associate               (615) 760-1475

  Educational Services / Interactive Entertainment                               Property/Casualty Insurance
  Arvind Bhatia, CFA            Mng. Dir.             (214) 702-4001             Dan Farrell                     Mng. Dir.               (212) 338-4782
  Luke Shagets                  Analyst               (214) 702-4030
                                                                               GLOBAL INDUSTRIAL INFRASTRUCTURE (GII)
  Footwear & Apparel
  Sam Poser                     SVP, Sr. Analyst      (212) 763-8226            ACME &Latin America
  Kenneth M. Stumphauzer        Analyst               (212) 763-8287             Lawrence T. De Maria, CFA       Director                (212) 338-4704
                                                                                 Ben Elias, CFA                  VP, Sr. Analyst         (212) 338-4706
  Leisure & Entertainment
  David Bain                    Mng. Dir.             (949) 721-6651             Building, Power & Water Infrastructure
  Sherry Yin                    Associate             (949) 721-6651             Michael J. Coleman, CFA         SVP, Sr. Analyst        (212) 338-4718

  Restaurants                                                                    Engineering and Construction
  Lynne Collier                 Mng. Dir.             (214) 702-4045             Chase Jacobson                  VP, Sr. Analyst         (212) 338-4753
  Philip May                    Analyst               (214) 702-4004
                                                                                 Industrial Components
ENERGY                                                                           Samuel H. Eisner                VP, Analyst             (212) 338-4705
  Oilfield Services & Equipment
  David S. Havens               Mng. Dir.             (212) 763-8238
                                                                                 Multi-Industry
                                                                                 Nicholas P. Heymann             Mng. Dir.               (212) 338-4703
  Karl Sowislo                  Analyst               (212) 338-4732
                                                                                 Paul A. Dircks                  Analyst                 (212) 338-4725
FINANCIAL SERVICES                                                               Jordan Calabrese                Associate               (212) 338-4729
  Asset Management                                                             TECHNOLOGY
  Jason Weyeneth, CFA           Analyst               (212) 763-8293
                                                                                 LEDs
  Banks & Thrifts                                                                Andrew Huang                    Mng. Dir.               (415) 362-6143
  James M. Schutz               Dir. of Fin. Ser.     (864) 241-3384             Naghmeh Rabii                   Associate               (415) 362-6141
  Adam Barkstrom, CFA           Mng. Dir.             (800) 906-0577
  Blair Brantley, CFA           Analyst               (800) 621-8635
                                                                                 Semiconductors
                                                                                 Vijay Rakesh                    Mng. Dir.               (312) 525-8431
  Matthew Kelley                Mng. Dir.             (207) 699-5800
  Mike I. Shafir                VP, Sr. Analyst       (212) 763-8239
  Matthew Breese                Analyst               (207) 699-5800           TRANSPORTATION, SERVICES & EQUIPMENT
  Edward D. Timmons             SVP, Sr. Analyst      (800) 203-5332             Jeffrey A. Kauffman             Mng. Dir.               (212) 338-4765
  Ashby W. Price                Associate             (888) 477-9602             Sal Vitale                      Analyst                 (212) 338-4766
  Brett Rabatin, CFA            SVP, Sr. Analyst      (877) 457-8625             Kanchana Pinnapureddy           Associate               (212) 338-4767
  Kenneth James                 Analyst               (615) 760-1474
  Peyton Green                  Mng. Dir.             (877) 492-2663           ADMINISTRATION
  Joe Maloney                   Associate             (615) 760-1468             Carlo Francisco                 Supervisory Analyst     (914) 434-3451
                                                                                 Marianne Pence                  Mgr., Res. Admin.       (205) 949-3618
Life Insurance                                                                   Nathan Mitchell                 Editor                  (205) 949-3635
  John M. Nadel                 Mng. Dir.             (212) 338-4717             Elizabeth Koch                  Editor                  (615) 289-4122
  Dennis Zavolock               Analyst               (212) 338-4748

Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)
                                                                 SALES & TRADING
                                  Steve Pokorny       Head of Institutional Sales         (214) 702-4020
                                  JT Cacciabaudo      Head of Trading                     (212) 763-8288

ATLANTA                                       DALLAS                                         NEW YORK (cont.)
Adam Aspes               (404) 812-3068       Jennifer Elkins            (214) 702-4050      Jeff Hood             (212) 490-1453
Adam Kramer              (404) 814-3902       Mary Foster                (214) 702-4009      Ed Iannone            (212) 763-8240
Jamie Pennington         (404) 814-3948       Dan Griffith               (214) 702-4044      Alex Jones            (212) 338-4701
John T. Riley            (404) 814-3966       Candace Martin             (214) 702-4033      Carey Kaufman         (212) 763-8274
                                              Bob Nasi                   (214) 702-4017      Konrad Krill          (212) 763-8218
BIRMINGHAM                                    John Schwalenberg          (214) 702-4010      Robert McGuire        (212) 763-8236
Gary Hagstrom            (205) 380-1782                                                      Brian McCloskey       (212) 763-8272
Sam Haskell              (205) 380-1781       MINNEAPOLIS                                    Van Martin            (212) 763-8214
Scott Hughen             (205) 380-1764       Randy Mason                (952) 820-4461      Adam Merlo            (212) 763-8232
Claude Preston           (205) 380-1762       John Regan III             (952) 841-6408      John Molster          (212) 763-8210
Amber Spitzer            (205) 380-1761                                                      Jake Morton           (212) 763-8261
                                              NEW ORLEANS                                    Michael Newman        (212) 763-8258
BOSTON                                                                                       Ryan Oelkers          (212) 763-8254
                                              Patrick Donnelly           (504) 636-4902
                                                                                             Kevin O'Keefe         (212) 763-8208
Frank Casey              (617) 478-5007       Cheryl Grabert             (504) 636-4911
                                                                                             Matt O’Kelly          (212) 763-8227
Richard Gill             (617) 478-5006       John Regan, Jr.            (850) 650-5676
                                                                                             David O’Shea          (212) 763-8260
Tom Goode                (617) 478-5008
                                                                                             Jon Palan             (212) 763-8225
Ian Moran                (617) 478-5003       NEW YORK
                                                                                             Bruce Rae             (212) 763-8271
Mike Roncone             (617) 478-5001       Jason Barber               (212) 763-8219      Kevin Reilly          (212) 763-8209
Nicholas White           (617) 478-5002       Brian Batista              (212) 763-8247      Jon Schenk            (212) 763-8221
                                              Andrew Benenson            (212) 763-8246      Chuck Schroeder       (212) 763-8264
CHICAGO                                       Adam Cavise                (212) 763-8292      Jason Scott           (212) 763-8215
Mark Burrier             (312) 525-8425       Mike Cline                 (212) 763-8268      Bob Sheahan           (212) 338-4757
Scott Hallermann         (312) 525-8421       Tom Criscoula              (212) 338-4719      Miko Tam              (212) 763-8252
Scott Hootman            (312) 525-8426       Noel Cueto                 (212) 763-8251      Scott Tashman         (212) 763-8256
Robert Hurley            (312) 525-8440       Enrico DeMatt              (212) 338-4724
Vesna Radovic            (312) 525-8429       Geri DeVito                (212) 763-8242
Dan Roesner              (312) 525-8433       Eric Dusansky              (212) 763-8231
                                                                                             SAN FRANCISCO
Lacey Spang              (312) 525-8423       Mike Flanagan              (212) 763-8282
                                                                                             Justin Brennan        (415) 362-6140
Curt Thompson            (312) 525-8427       Rich Gallagher             (212) 763-8260
                                                                                             Tom Cervantez         (415) 362-7430
                                              Brian Haise                (212) 763-8206
                                                                                             Chris Larson          (415) 362-6142
                                                                                             Rob Salomon           (415) 362-7432



                                                     INVESTMENT BANKING
Mark Behrman, Mng. Dir.                         (212) 763-8286         Kimberlee Taylor, Admin. Asst.             (212) 338-4715

FINANCIAL INSTITUTIONS GROUP                                          NON-FINANCIALS
Michael J. O’Boyle, Mng. Dir.                   (205) 949-3592        John Bolebruch, Mng. Dir. – Industrials     (212) 338-4716
Michael Perry, Mng. Dir.                        (212) 338-4736        Ted Cook, Mng. Dir. – Industrials           (212) 338-4779
Robert P. Hutchinson, Mng. Dir.                 (617) 478-5011        Richard Mandery, Mng. Dir.                  (212) 338-4776
Jeffrey W. Prochnow, CFA, SVP                   (402) 778-5054        Richard Cunniffe, SVP – Industrials         (212) 338-4713
D. Timothy Speegle, SVP                         (205) 380-1720        Will Brooke, Analyst - Industrials          (212) 763-8278
John McCrory, SVP                               (205) 949-3664
Robert Toma, VP                                 (617) 478-5005
Horacio Barakat, VP                             (212) 338-4768        EQUITY SYNDICATE
Andrew Stager, Associate                        (617) 478-5009        Craig B. Jampol, Mng. Dir.                  (212) 338-4708
Nathan Strall, Associate                        (617) 478-5010
Jung Lee, Associate                             (212) 338-4769
Michael Stern, Analyst                          (212) 338-4756


Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)
                                                             LOCATIONS


      Corporate Headquarters                               13727 Noel Road                             12020 Shamrock Plaza
                                                                 th
     800 Shades Creek Parkway                                   7 Floor                                       Suite 200
             Suite 700                                     Dallas, TX 75240                            Omaha, NE 68154-3537
       Birmingham, AL 35209                                 (972) 239-4806                                 (402) 778-5054
                                                            (800) 404-2226                               (402) 778-5135 fax
 (205) 949-3500     (800) 239-2408
         (205) 802-1414 fax                               (972) 980-7125 fax
                                                                                                       620 Newport Center Dr.
                                                                                                             Suite 1100
       OTHER LOCATIONS                                706 E. Washington Street
                                                       Greenville, SC 29601                          Newport Beach, CA 92660
                                                           (864) 233-6630                                  (949) 721-6651
          3475 Lenox Road                                (864) 233-6630 fax                              (949) 721-6652 fax
              Suite 800
         Atlanta, GA 30326
           (404) 365-9630                              3100 West End Avenue                                  2 Union Street
         (404) 812-3097 fax                                  Suite 930                                         Suite 403
                                                        Nashville, TN 37203                              Portland, ME 04101
                                                          (615) 269-7323                                    (207) 699-5800
  8400 Normandale Lake Boulevard                          (615) 269-9223                                  (207) 699-5888 fax
             Suite 920
     Bloomington, MN 55437
          (952) 841-6410                                                                                5609 Patterson Avenue
                                                           639 Loyola Ave
          (800) 949-4102                                                                                        Suite B
                                                              Suite 200
                                                       New Orleans, LA 70113                            Richmond, VA 23226
                                                           (504) 299-1021                                   (804) 521-3224
         265 Franklin Street                                                                              (804) 521-3199 fax
                                                           (888) 978-3763
              Suite 310
                                                         (504) 299-0956 fax
         Boston, MA 02110
           (617) 478-5000                                                                                One Maritime Plaza
           (800) 836-4616                                                                                    Suite 1940
                                                        2 Grand Central Tower
         (617) 443-0310 fax                                                                           San Francisco, CA 94111
                                                         140 East 45th Street
                                                                                                           (415) 362-7430
                                                               18th Floor
                                                                                                         (415) 362-7436 fax
                                                        New York, NY 10017
         123 N. Wacker Drive
                                                            (212) 763-8224
              Suite 1250
                                                            (800) 966-0814
         Chicago, IL 60606
                                                          (212) 763-8201 fax
            (312) 525-8440
            (800) 966-0815
          (312) 525-8438 fax




Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

								
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