Will 3M Stock Rebound To Its Pre-Inflation Shock Highs?

3M stock (NYSE: MMM) currently trades at $98 per share, roughly 50% below its level in March 2021, and it has the potential for sizable gains. 3M saw its stock trading at around $129 in late June 2022, just before the Fed started increasing rates, and is now 24% below that level. The stock has lost 11% since September 2022 compared to the S&P 500, which gained about 13% during this period. The decline in 3M stock over the recent past can be attributed to its ongoing litigation around “forever chemicals” and alleged defective earplugs. There were recent reports of 3M being able to tentatively settle some of its litigations related to forever chemicals for $10 billion, lower than anticipated. ^[1] Furthermore, earlier this week, a U.S. judge allowed delaying a “forever chemical” trial after 3M stated that it was close to a settlement. ^[2] Still, rising concerns about a potential recession and its impact on 3M’s businesses exist. The decline in 3M’s revenues over recent quarters has also contributed to the stock’s underperformance.

Returning to the pre-inflation shock level means that 3M stock will have to gain 112% from here. However, we do not believe that will materialize any time soon and estimate 3M’s valuation to be around $118 per share, implying about 20% gains. This is because of uncertainties around the litigation, their potential exposure for 3M, and the decline in sales and earnings in the near term. 3M’s operating margin has contracted from 20.8% in 2021 to 18.4% now. Our 3M Operating Income Comparison dashboard has more details. Still, from a valuation perspective, MMM stock appears to have room for growth from its current levels of under $100.