3M Stock Surges After Upgrade by Bank of America Analysts

Key Takeaways

• 3M shares rose over 2% Friday, leading gains on the Dow after Bank of America (BofA) analysts upgraded 3M stock, citing optimism about the company’s direction under new CEO Bill Brown.
• The analysts raised their rating of 3M’s stock to “buy” from “neutral,” with a price target of $120, up from their earlier $105.
• BofA suggested 3M can better focus on improving its operations, with major lawsuits settled and its health-care business spun off.

3M (MMM) was the best-performing stock on the Dow Jones Industrial Average Friday after Bank of America (BofA) upgraded the stock, citing optimism about the company’s direction under new CEO Bill Brown. BofA raised its rating on the consumer and commercial products giant to “buy” from “neutral,” and lifted the stock’s price target to $120 from $105.

The analysts wrote in a Friday note that they see Brown, who took over last month, as “refocusing the company on growth and operations.” They added that the change in leadership came “at an opportune time” because 3M has spent the last several years battling class-action lawsuits over so-called “forever chemicals” known as PFAS, and military earplugs. The company has moved to exit PFAS manufacturing and spin off its health-care unit.

Analysts Cite Brown’s Focus on Growth, Operating Efficiency

The BofA analysts said that with major legal challenges for 3M settled and lower uncertainty about remaining lawsuits, “investors are likely to focus on improving operations, potential cyclical leverage, and inexpensive valuation even when adjusted for future legal liabilities.” Analysts noted that in a video Q&A sent to 3M employees May 12, Brown “clearly stated that innovation driven organic growth and operating efficiency are his two top priorities.”

The analysts said the video message also showed Brown spent his first days at the helm visiting 3M’s manufacturing and research and development (R&D) facilities, “the two areas of the company which historically have been at the heart of 3M culture.” 3M shares closed 2.7% higher at $100.86 Friday, contributing to their over 10% gain since the start of the year.

Positive Market Reaction

The market reacted positively to BofA’s upgrade of 3M stock, with shares surging over 2% on Friday. This increase was significant, especially considering the overall market conditions. Investors seem to be optimistic about the company’s future prospects under new leadership and the strategic decisions being made to address past legal challenges.

3M’s focus on growth and operational efficiency aligns with current market trends where investors are looking for companies that can demonstrate sustainable growth and effective cost management. The company’s decision to settle major lawsuits and spin off its health-care unit also indicates a commitment to resolving past issues and streamlining its operations for better performance.

Looking Ahead

With the recent upgrade by BofA and positive market reaction, 3M seems to be on a path towards recovery and growth. The new CEO’s emphasis on innovation-driven organic growth and operational efficiency bodes well for the company’s future performance. Investors are likely to closely monitor 3M’s progress in implementing these strategies and achieving its financial targets.

Overall, the outlook for 3M appears promising, with potential for further stock price appreciation as the company executes its growth plans and demonstrates improved operational efficiency. The recent upgrade by Bank of America reflects confidence in 3M’s ability to overcome past challenges and capitalize on new opportunities in the market.

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