Company Reports

Upon further analysis, we raise our 3M fair value estimate to $104 per share from $99 to account for Solventum’s “midnight dividend” of $7.7 billion to 3M, but mostly offset by other lost cash implications from Solventum’s prior contribution. At current market prices, as of April 4, 2024, of just over $90, this implies 3M trades at a roughly 12% discount to our revised fair value estimate.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its 2023 settlements and the spinoff of Solventum greatly reduce 3M's risks and is the right move for shareholders. However, we remain concerned over 3M's ability to absorb additional PFAS-related liabilities.

After reviewing 3M and 3M health care, or Solventum’s filings, we reduced our fair value estimate to $99 from $127, or roughly 22%. That said, our valuation is driven by the lost earnings and cash flow associated with the spinoff. Our long-term view of 3M’s remaining industrial and consumer-facing businesses remains intact. In fact, we think these businesses will increase their top line organically by roughly 2%-3% over our long-term forecast, and enjoy volume leverage somewhere between 30% and 40%, adjusted for the impacts from both the Solventum spin and 3M’s decision to manufacture PFAS-related products.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its 2023 settlements greatly reduce 3M's risks and is the right move for shareholders. However, we remain concerned over 3M's ability to absorb additional PFAS-related liabilities, particularly related to personal injury exposure.

Narrow-moat 3M announced it has named a new CEO in Bill Brown. We like the news and view the change as an indictment of the Roman era. That said, we maintain our $127 fair value estimate.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its 2023 settlements greatly reduce 3M's risks and is the right move for shareholders. However, we remain concerned over 3M's ability to absorb additional PFAS-related liabilities.

Narrow-moat rated 3M posted in-line fourth-quarter results. Therefore, we maintain our $124 fair value. While fourth-quarter sales were slightly below expectations, adjusted operating margins came in a bit higher. That said, legal-related charges represent real costs to shareholders, and those boosted adjusted results. Nevertheless, we think the selloff following the release was an overreaction to a weaker-than-expected 2024 organic sales guide.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its 2023 settlements greatly reduce 3M's risks and is the right move for shareholders. However, we remain concerned over 3M's ability to absorb additional PFAS-related liabilities.

Nothing in narrow-moat-rated 3M’s third-quarter results materially alters our long-term view. We raise our fair value estimate to $124 from $123 following our Oct. 24 valuation change, when we downgraded 3M’s moat to narrow from wide. 3M’s third-quarter earnings beat our expectations; however, quarterly adjusted revenue was right in line and business segment operating profits dipped slightly below what we had penciled in.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its 2023 settlements greatly reduce 3M's risks and is the right move for shareholders. However, we remain concerned over 3M's ability to absorb additional PFAS-related liabilities.

We reduced our 3M fair value estimate to $123 from $131, due to the moat downgrade to narrow from wide. We think that 3M’s basic moat framework remains valid. Specifically, 3M's centralized research and development capabilities should protect excess returns. However, that argument is far weaker than it used to be. Consequently, we’re less confident in 3M's moat durability.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its 2023 settlements greatly reduce 3M's risks and is the right move for shareholders. However, we remain concerned over 3M's ability to absorb additional PFAS-related liabilities.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its 2023 settlements greatly reduce 3M's risks and is the right move for shareholders. However, we remain concerned over 3M's ability to absorb additional PFAS-related liabilities.

Various reputable media outlets report that 3M is nearing a roughly $5.5 billion settlement related to its Combat Arms earplugs. Consequently, we don't expect to materially change our $131 fair value estimate, if at all. In fact, the nearly $5.5 billion figure is very close to our $4.9 billion estimate, and well below the market estimates we've seen floating around of $10 billion-$15 billion for Combat Arms. Even so, it's still materially more than the $1 billion settlement trust 3M had initially proposed to resolve these issues.

After reviewing wide-moat-rated 3M’s latest quarter, we raise our fair value estimate to $131 from $121 previously. After truing up its latest liabilities, we come away more confident in 3M’s liquidity position to fund the dividend. Results were also better than we expected. However, we point out that 3M’s potential legal outcomes remain widely uncertain, and we’re closely examining the effects of PFAS, both on the environment and on people. Of course, ear plug litigation related to Combat Arms remains another critical area of concern.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its June 22 settlement reduces some of 3M's risks and is the right move for shareholders. However, we now believe 3M is a value trap given its continued exposure to legal liabilities and the risk of a dividend cut.

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.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its June 22 settlement reduces some of 3M's risks and is the right move for shareholders. However, we now believe 3M is a value trap given its continued exposure to legal liabilities and the risk of a dividend cut.

We reduce our 3M fair value estimate to $121 from $127. However, we maintain our wide moat rating and High Morningstar Uncertainty Rating, for now. We base our fair value estimate reduction on 3M’s perfluoroalkyl or polyfluoroalkyl substance settlement dated June 22. We think 3M’s total PFAS liabilities are about $20 billion, including the June 22 settlement. However, including its Combat Arms earplug lawsuits, we think its legal liabilities rise to about $24 billion in a base-case scenario.

Estimating 3M's legal liabilities is a highly uncertain exercise. While some believe these total liabilities are greater than the firm's market capitalization, we think its June 22 settlement reduces some of 3M's risks and is the right move for shareholders. However, we now believe 3M is a value trap given its continued exposure to legal liabilities alnd the risk of a dividend cut.