3M litigation and environmental remediation costs to weigh on valuation — BofA

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BofA analysts maintained an Underperform rating and $120 price target on 3M Company (NYSE:MMM) shares in a note Tuesday.

The note explained BofA’s thoughts on Judge Rodgers, the judge in the Combat Arms multi-district litigation (MDL), blocking 3M’s bid to shift responsibility to its Aearo Technologies subsidiary.

The analysts said 3M can appeal the ruling, with the case likely appealed to the Eleventh Circuit Court, “which has, as recently as late October, sided with 3M in overturning a decision of Judge Rodgers.”

The analysts added that Judge Rodgers “also sanctioned 3M due to ‘brazen abuse of the litigation process,’ by saying in the future it cannot try and contest its own liability as a successor to Aearo.”

“3M faces a wide variety of litigation and environmental remediation costs which we think will continue to weigh on valuation and we maintain our Underperform rating,” the analysts write.

Meanwhile, they said there is potentially another PFAS lawsuit due to its Flemish factory.

“Earlier this week 3M announced it will be exiting PFAS manufacturing. We think it is unlikely to impact near- to mid-term litigation but could play a part in broader settlement. While thinking about potential PFAS litigation we note the Dutch government is currently investigating their legal options against 3M due to the pollution of the Dutch part of the Scheldt River,” explained the analysts. “The government is alleging that 3M’s Belgian plant contaminated the groundwater which seeped into the Scheldt. The Netherlands is investigating the alleged link between 3M’s Belgian plant and the PFAS contamination found in the Western Scheldt.”