Investors always pay attention when a stock is upgraded or downgraded on Wall Street. In this case, the much-maligned materials giant, 3M, has received an upgrade to Hold, which may provide some relief for its shareholders.
Bank of America Securities analyst, Andrew Obin, has upgraded 3M (ticker: MMM) shares from Sell to Hold. Although it is not a bold call, Obin sees a few positive catalysts that could alleviate the pressure on the company’s shares. Despite the upgrade, his price target remains unchanged at $110 per share.
One positive factor is the recent settlement of over $10 billion with U.S. water providers for the remediation of PFAS in drinking water. PFAS refers to a group of chemicals produced by 3M and other companies that have been found in water supplies. This settlement marks the beginning of the process to address the PFAS issue, but there are still other related lawsuits pending.
Moreover, 3M is also implementing cost-cutting measures, which Obin believes could have “underappreciated” benefits. Furthermore, the company plans to spin off its healthcare business, scheduled for late 2023 or early 2024.
Following the upgrade, 3M shares have risen by more than 3.7% on Tuesday, while the S&P 500 and Dow Jones Industrial Average have seen modest gains of 0.2% and 0.3%, respectively.
This positive reaction is significant considering the lack of positive news for 3M investors in recent times. Over the past year, the company’s shares have declined by approximately 25% and have plummeted more than 60% from their all-time highs in 2018. Factors such as PFAS problems, lawsuits related to potentially faulty earplugs sold to the U.S. military, a slowing economy, and rising interest rates have all contributed to the decline in investor sentiment.
Furthermore, analysts are not particularly optimistic about 3M stock. According to FactSet, no analysts rate 3M shares as Buy, which is in stark contrast to the average Buy-rating ratio of around 55% for stocks in the S&P 500. With the upgrade to Hold, approximately 20% of analysts covering the company still rate the shares as Sell. However, the average Sell-rating ratio for an S&P stock is less than 10%.
The average analyst price target for 3M shares is $107, which is close to Obin’s $110 level.
It is worth noting that back in mid-2018, the average analyst price target was around $220 per share. These past few years have been challenging for 3M and its shareholders.
In conclusion, the recent upgrade to Hold offers a glimmer of hope for 3M shareholders amidst a turbulent period. However, the company still faces significant challenges that need to be overcome for a full recovery.