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3M's focus on research and development has been paying off as organic growth drives results.

3M plans to acquire large-size, attractive businesses to augment its organic sales growth.

3M is well positioned to generate higher profits through its strong pricing power in the global markets.

Earnings season is now in full swing, and the industrial conglomerate giant 3M (NYSE: MMM) has reported market-topping second-quarter revenues of $8.1 billion, a year-on-year increase of 4.8% over the same period last year. Earnings per share of $1.91, up 11.7% year-over-year, were in line with analysts' consensus earnings estimates, according to Yahoo! Finance.

Although 3M has experienced severe impact on its top line due to unfavourable dollar exchange rates this year, the company continued to boost its organic local-currency sales growth across all geographic regions, including EMEA (Europe, the Middle East, and Africa), Latin America/Canada, and Asia Pacific.

3M capitalizes on its long legacy of developing cutting-edge products and solutions, varying from consumer electronics and healthcare to commercial safety and industrial adhesives. 3M boasts ambitious plans to spend about 6% of total sales on research and development and commercialization of innovative products by 2017, which could result in incremental revenue and earnings growth.

Here's why 3M is poised to outperform
3M continues to benefit through the transition from acquisition growth strategy to focus on research and development, as the company's organic growth proliferated to 4.8% from just 2.6% in 2012. 3M's long-term bet in hot areas like energy, aerospace, and displays is likely to drive higher organic growth over the next few years. In addition, the company announced it is to acquire the remaining 25% ownership interest in Japan-based Sumitomo 3M subsidiary for about $885 million in an all-cash deal, which would allow it to improve the business and enhance shareholder returns. 3M has plans to spend between $5 billion and $10 billion on mergers and acquisitions over the next three to four years if it can find potential targets to bolster its business prospects.

With a strong rebound in oil and gas exploration and production activities across the world, 3M's oil and gas division could capitalize on the opportunity to help energy companies looking to cut their operational costs and boost crude oil production. 3M's track record of innovation is indisputable and its ceramic sand screens (ten times harder than traditional materials) have helped oil and gas companies to increase their crude oil production levels through minimizing replacement time. 3M could also benefit from the increasing demand of ceramic materials in aerospace applications. In addition, the company's new glass bubble technology can enable energy companies in cementing wells and drilling muds at much greater depths. However, 3M might face tough competition from fellow conglomerates, General Electric (NYSE: GE) and United Technologies (NYSE: UTX), which have made strong moves into the energy and aerospace market.

Most recently, 3M's electronics solutions materials division rolled out a new LED chip packaging substrate made up of copper and polyimide, which offers a cost-effective substitute to traditional ceramic substrates available in the market. Moreover, the company inked an agreement with TriZetto Corporation to integrate grouping, edit, compliance, and payment methodologies with TriZetto's NetworX solutions. 3M also plans to launch a multi-touch system, PCT2420PX, in sizes ranging from 32 inches to 46 inches, and a new standard for eBook and eAudiobook lending with Cloud Library application to enhance user experience. With the increasing usage of high-speed data services on smart devices across the world, the overall demand for high-quality, multi-touch display systems is expected to increase precipitously in the coming years.

The bottom line
3M's continued focus on technological innovations enables it to maintain a higher margin on its products. 3M also anticipates sales growth in China to triple the global average over the next five years, as the country plans to address increasing environmental and public health issues. Despite strong currency headwinds, the company maintained its full-year earnings guidance between $7.30 and $7.55 on organic local-currency sales growth of 3% to 6%. The company has also increased its shareholder distributions for more than 56 consecutive years. Although the stock doesn't look cheap at 21 times trailing earnings, 3M can be a great buy for investors looking to secure current income through dividends.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.