3M Company (NYSE:MMM), a manufacturer and seller of industrial, safety, and consumer products worldwide, has finally reached an agreement to settle its years-long litigation covering hundreds of lawsuits related to the contamination of soil and drinking water. 3M agreed to pay between $10.3 and $12.5 billion to settle the cases. The settlement amount will be used to detect the presence of PFAS (per-and poly-fluoroalkyl substances) chemicals in the public water system as well as to install water filtration technologies across the affected cities. Following the news, MMM stock rose over 5% in the extended trading session yesterday, June 22.
The company has announced that it will incur a charge of $10.3 billion related to the settlement in the second quarter. The payment will be spread out over a period of 13 years. However, 3M emphasized that this agreement is tentative and “not an admission of liability”. In the event that certain conditions outlined in the settlement are not met, the company is ready to continue defending its stance in a court of law.
Having said that, the company is happy that this big overhang is behind it. However, 3M still has hundreds of ongoing lawsuits for the manufacturing of PFAS that relate to personal health and property claims.
PFAS are also called “forever chemicals” because they do not dissolve or degrade in the environment. Plaintiffs claim that the seepage of forever chemicals in the soil and public water systems has led to serious health hazards in the communities. MMM uses these PFAS substances in manufacturing firefighting foam that is used by the military and fire departments, as well as in other industrial goods production. The company has already pledged that it will stop producing PFAS completely by 2025 and use safer alternatives.
Is it a Good Time to Buy 3M Stock?
Wall Street remains cautious about MMM stock as the company still has several thousand of pending lawsuits. 3M is fighting some 300,000 claims for its defective foam earplugs used by U.S. combat troops, the settlement of which could cost it another $10 billion or more. Analysts also worry that the huge settlement charges of these litigations could hamper 3M’s dividend-paying capacity, one of the most attractive attributes of the stock. Hence, analysts have awarded the stock a Moderate Sell consensus rating based on six Hold and five Sell ratings.
On TipRanks, the average 3M Company price target of $105.91 implies 5.5% upside potential from current levels. Meanwhile, year-to-date, MMM stock has lost 15.7%.
