3M: Moving Our Uncertainty Rating to Very High

Upon further review, we move our 3M Uncertainty Rating to Very High. Consistent with our June 23 note, we think estimating 3M’s legal risks is a highly uncertain exercise. We reiterate that we think the settlement payment poses a risk to the dividend, particularly after the upcoming healthcare spinoff and with additional lingering legal risks like per- or poly-fluoroalkyl substance-related personal injury or additional environmental claims. That said, we still think the stock has value, and $20 billion for total PFAS liabilities (inclusive of the settlement), and nearly $4 billion in Combat Arms liabilities remains our base-case assessment, which is meaningfully lower than the market's estimates. We will continue to update investors as additional facts surface.