Investors are finally getting a clearer picture of the financial costs stemming from the legal burdens that have hit shares of the materials giant
That’s encouraging.
This is a good result for 3M stock. “Near the bottom line of expectations,” RBC analyst Dean Dry wrote in a report. 3M’s balance sheet can handle that amount, too. “We estimate that 3M should have in excess of approximately $18 billion in liquidity available to meet its legal obligations, including cash and free cash flow for the second half of 2023, the healthcare dividend, and the value of the remaining healthcare stake (20%). .which will be retained by the parent company.”
3M will spin off its healthcare division as a separate company by the end of the year.
Dray Rates 3M is participating in the sale and has a target price of $100. Citi analyst Andrew Kaplowitz rates the stock firm. Its price target is $111 per share. Kaplowitz also described the possible settlement as a minimum expectation.
“Equally important, we believe that the potential settlement could represent another step in 3M’s relief from its legal burdens and away from the litigation noise that has been affecting 3M’s valuation and could, in our view, be favorably received by investors,” Kaplowitz wrote in a report. for him. a report. “We still think 3M has a hill to climb.”
3M also has responsibilities associated with chemicals referred to as PFAS that the company produces and other substances found in groundwater. 3M recently announced a $12.5 billion settlement with US providers of process water. 3M still faces lawsuits over water pollution.
However, things are starting to move forward. 3M shares were up 6% in premarket trading at $104.89.
Standard & Poor’s 500
And
Dow Jones Industrial Average
Futures rose 0.1% and 0.2%, respectively.
Legal issues were important to the shares. 3M stock is down about 60% from its all-time high of around $250 a share in 2018. That has removed nearly $80 billion from market value. This is one way to measure how much investors discount 3M stock due to litigation issues.
The declines left 3M shares trading at nearly 10 times earnings estimates for 2024. In 2018, near the peak, 3M shares traded at about 22 times earnings in 2019.
If 3M shares trade for 22 times 2024 earnings, the share price will be about $215 a piece. This is still below its all-time high, which indicates that 3M’s business has suffered in recent years as well.
In 2018, 3M was projected to earn more than $11 a share in 2019. It ended up earning about $9 a share. Wall Street expects 3M to earn about $9.80 a share in 2024.
Write to Al Root at [email protected]
