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3M, which makes everything from Post-It Notes to insect repellent, said Thursday strong sales of health care products in flu-wary Asia helped lift earnings beyond analyst expectations in the

third quarter. As a result, the St. Paul, Minn.-based conglomerate and Dow Jones component raised its full-year outlook for the second time in as many quarters. Its shares hit a new 52-week

high. But until demand improves the company will keep capital expenditures generally flat and maintain a hold on share buybacks, CEO George W. Buckley said in a conference call.

Nevertheless, Buckley said he expects selective hiring and increased spending on research and development as the company strives to boost revenue. For the three months ended in September net

income slid to $957 million, or $1.35 per share, from $991 million, or $1.41 per share, in the year-earlier period. Excluding one-time items, 3M earned $1.37 per share, well above the $1.17

most analysts were expecting. Revenue slipped 5.6 percent to $6.19 billion from $6.56 billion but still topped Wall Street's forecast of $5.77 billion. Free cash flow nearly doubled to

$1.6 billion and, according to Barclays analyst Shannon O'Callaghan, the company achieved a record 24.3 percent profit margin. 3M raised its 2009 earnings-per-share forecast to a range

of $4.50 to $4.55, from a July estimate of $4.10 to $4.30 per share. That previous estimate was in turn increased from an April estimate of $3.90 to $4.30 per share. Analysts project

earnings per share of $4.25 for the year. Asian revenue surged 3 percent while U.S. revenue plunged 8.3 percent. In Europe, 3M's revenue tumbled 9.3 percent. Sales of optical systems

used in flat-panel TVs surged 26 percent to $864 million, and revenue from health care products like face masks jumped 4.7 percent to $1.1 billion. Those increases were more than offset by

declines in sales to appliance manufacturers and car makers, sales of consumer and office products, security and protection services and electronic and communications components. "The

surprise here is the magnitude of the outperformance," said Edward Jones analyst Daniel Ortwerth, who has a "Buy" rating on the shares. Ortwerth cited strength in the Chinese

auto aftermarket, face mask sales, digital dentistry products and optical film demand. The analyst also concurred with Buckley's statement that U.S. federal stimulus spending appears to

have had little effect on the domestic economy, in contrast to China where more precisely targeted and rapidly implemented initiatives have noticeably boosted employment and demand, to

3M's benefit. * Get Real-Time Quotes for 3M