Francesco Scatina
3M (New York Stock Exchange: MMM) and a Florida city this week that a federal judge gave it more time to try to reach a global settlement in a landmark trial that will decide how much the makers of Forever Chemicals will have to pay To filter potable water nationwide.
The possibility of avoiding a trial is encouraging, analysts at investment bank Morgan Stanley said Wednesday, but it still leaves 3M (MMM) as a target for other lawsuits.
“We think the risk/reward in a better understanding of liability quantum is more balanced today as the implied total looks more reasonable,” Joshua C. Pokrzywijnski, an analyst at Morgan Stanley, said in a report dated June 7.
The bank maintains its rating lower at 3 million (million cubic meters) because the company is more cyclical than its peers in the industrial sector.
3M (MMM), maker of Scotch tape and Post-It notes, is defending itself against claims that per- and polyfluoroalkyl substances, or PFAS, made for decades contaminated drinking water and soil. They are known as forever chemicals because they do not degrade easily in the environment or animal tissues. 3M (MMM) has also been sued over foam earplugs it made for the military.
3M (MMM) stock soared last week after a news report said the company agreed to a preliminary settlement of at least $10 billion with a variety of US cities and towns to resolve water pollution claims related to chemicals for good. The potential cost of the settlement was lower than some investors had estimated.
The report came days before the start of the trial in Stewart, Florida. The case may help set a precedent for whether 3M (MMM) and other companies that made PFAS or used the chemicals to make aqueous film forming foam (AFFF) for firefighting should pay to remove them from drinking water in thousands of American cities.
The case for the lead is seen as helping set a precedent for whether companies like 3M that make chemicals or firefighting foam containing them should pay billions of dollars to remove them from water systems across the United States, or whether cities will bear the cost. . population.
“Clarity should be a net positive given the significant decline over the past year, but AFFF is only one aspect of PFAS including personal injury, property damage, medical monitoring and other PFAS treatment outside of AFFF,” according to Morgan Stanley. “A rumored settlement of ‘at least $10 billion’ cited by Bloomberg could provide an order of magnitude, but 3M (MMM) has not confirmed any number and the brokerage is private.”
3M’s (MMM) potential legal liabilities could prevent the company from acquiring businesses whose growth is linked to the digitization of the industrial sector, according to Morgan Stanley. Also, 3M (MMM) may not benefit from the growth in computing power needed for AI because it stops using PFAS in chemicals to prevent processors from overheating.
“Electronics and heat management remain important across the 3M (MMM) portfolio, and we continue to expect content growth in areas such as automotive (both electric vehicles and internal combustion engine) based on higher electronics content, but AI computing details look less positive than they might be. in the past,” according to Morgan Stanley.
More on 3M’s legal issues
- 3M has been granted a delay in prosecuting the chemicals in perpetuity amid settlement talks
- 3M CEO ordered to attend mediation over earplug litigation