3M Co (NYSE:MMM) stock rose 0.70% (As on July 12, 11:21:16 AM UTC-4, Source: Google Finance) after the company got upgraded to hold from underperform by Bank of America analyst Andrew Obin. His price target is unchanged at $110 a share. The firm said litigation settlements, restructuring and the planned spinoff for the health-care business could all help the stock going forward. The company will continue to focus its commercial efforts in high-growth markets including automotive electrification, home improvement, personal safety, electronics, and health care. In addition, 3M will prioritize emerging growth areas such as climate technology, sustainable packaging, industrial automation, semiconductors, and next-generation consumer electronics.
The recent $10 billion-plus settlement with U.S. water providers for remediation of PFAS in drinking water. PFAS is the name for a group of chemicals produced by 3M and others that have been found in water supplies. The settlement starts the process of removing the PFAS overhang from 3M stock. There are still other PFAS-related lawsuits to contend with, however. In addition to the settlement, 3M is cutting costs, which may yield “underappreciated” benefits, according to Obin. There is also the spin-off of the company’s health care business, slated for late 2023 or early 2024.
Further, 3M is taking restructuring actions that are intended to make 3M stronger, leaner and more focused. The structural reorganization will reduce the size of the corporate center of the company, simplify supply chain, streamline 3M’s geographic footprint, reduce layers of management, and further align business go-to-market models to customers. These restructuring actions are expected to affect all functions, businesses, and geographies and will impact approximately 6,000 positions globally, in addition to the reduction of 2,500 global manufacturing roles announced in January 2023. 3M anticipates annual pre-tax savings of $700 million to $900 million upon completion of these actions. These actions are expected to meaningfully reduce costs and drive long-term improvement in margins and cash flow while enabling a more efficient and effective structure for driving long-term growth.
3M affirms its full-year expectations for 2023 including -6 to -2 percent adjusted total sales growth^, reflecting adjusted organic sales growth of -3 percent to flat, Adjusted earnings per share of $8.50 to $9.00 and Adjusted operating cash flow of $5.8 to $6.3 billion contributing to 90% to 100% adjusted free cash flow conversion
Furthermore, in the first quarter, operating cash flow was $1.3 billion, up 26 percent year-on-year, while adjusted free cash flow was $0.9 billion, up 24 percent year-on-year.