Investors typically pay closer attention when Wall Street upgrades a stock to Buy or downgrades a stock to Sell.
3M
shares were just upgraded to Hold. It’s not a bold call, but shareholders of the embattled materials giant will take it.
Bank of America Securities analyst Andrew Obin upgraded 3M (ticker: MMM) shares to the equivalent of Hold from Sell Tuesday. His price target is unchanged at $110 a share. Obin sees a few positive catalysts that can ease pressure on shares.
The first is 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.
The upgrade has 3M stock up more than 2% in premarket trading at $99.30.
S&P 500
and
Dow Jones Industrial Average
futures are both up 0.2%.
It’s a positive reaction partly because there hasn’t been a lot of positive news for 3M investors to digest. The shares are down about 25% over the past 12 months and are off more than 60% from all-time highs reached in 2018. PFAS problems, lawsuits related to potential faulty earplugs sold to the U.S. military, a slowing economy, and rising interest rates have all weighed on investor sentiment.
The Street isn’t high on 3M stock either. No analysts rate 3M shares Buy, according to FactSet. The average Buy-rating ratio for a stock in the S&P 500 is about 55%. With the upgrade to Hold, about 20% of analysts covering the company rate shares Sell. The average Sell-rating ratio for an S&P stock is less than 10%.
The average analyst price target is $107 a share, close to Obin’s $110 level.
Back in the middle of 2018, the average analyst price target was about $220 a share. It’s been a rough few years for 3M and its shareholders.
Write to Al Root at [email protected]
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