3M Stock (NYSE:MMM)
Citibank analysts see the settlement of hundreds of lawsuits filed by communities alleging that their drinking water was damaged by “forever chemicals” created by 3M (NYSE:MMM) as a good step for shareholders.
Investors may be concerned about the impact on 3M’s (MMM) free cash flow (and dividend) if a large settlement must be funded immediately. Still, Citibank analyst Andrew Kaplowitz wrote on June 22 that the company’s ability to fund the liability over time should alleviate some of their worries.
Payments by 3M (NYSE:MMM) will be spread out over 13 years. However, the company will record a pretax charge of $10,3 billion in the current quarter. The corporation has promised further information in a future SEC filing.
3M (NYSE:MMM) PFAS chemicals used in firefighting foam have been linked to groundwater contamination in cities and towns throughout the United States, prompting the settlement. PFAS have been given the moniker “forever chemicals” due to their indestructibility in living tissue and the natural environment. The assertions were refuted by 3M.
In 2022, the company’s sales dropped by 3% year-over-year to $34.2 billion due in part to the fluctuating value of the dollar against foreign currencies. In the form of dividends and stock repurchases, 3M stock paid its investors $4.8 billion back.
After a bellwether trial in which a Florida community accused 3M (NYSE:MMM) of poisoning its drinking water was allowed to be delayed by Judge Richard Gergel in the U.S. District Court for the District of South Carolina, the PFAS settlement was reached around three weeks later. Both parties’ attorneys have requested additional time to negotiate a settlement, contingent on the court’s consent.
Citibank warned that personal harm litigation involving PFAS and military earplugs are not the only possible legal risks for 3M (NYSE:MMM). In the largest civil injury lawsuit in U.S. history, around 250,000 veterans sued the corporation, alleging that their Combat Arms earplugs did not adequately protect against hearing loss.
Citibank claims that although the payment is significant, it is merely a fraction of 3M (NYSE:MMM) total continuing litigation obligations. Nevertheless, we anticipate a positive reaction from investors to this news.
Based on a price-to-earnings ratio of 12 times the expected $10 in EPS for 2024, the bank has set a price objective of $120 for 3M stock. In the 12 months leading up to June 22, the share price fell nearly 22% to $100.43.
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Author Shariq Khan 
