3M’s healthcare spinoff Solventum earns buy at Stifel on faster turnaround

Stifel launched its coverage of Solventum Corporation (NYSE:SOLV), the healthcare spinoff of industrial conglomerate 3M (NYSE:MMM), with a buy recommendation citing a faster-than-expected turnaround.

3M (MMM), the maker of Scotch tape and Post-it Notes, completed the spinoff in April, leaving a company that recorded $8.2B in sales in 2023 under the leadership of CEO Bryan Hanson and CFO Wayde McMillan.

“Solventum is a turnaround story likely to unfold over a multi-year time horizon,” Stifel analyst Rick Wise wrote, noting the company’s efforts to pivot from current flat-to-low single-digit sales growth to mid-single-digit top-line growth in the long term.

“But, given management’s previous successful transformation experience, we have high conviction that positive fundamental change is underway and will transpire at a faster, ever-more-visible pace and magnitude than investors currently contemplate,” Wise added.

The analyst argued that Solventum’s (SOLV) better-than-expected Q2 2024 results “seem like an early positive signal for what’s ahead as Solventum’s multi-year transformation unfolds.”

He added that SOLV’s management will likely continue with “prudent expectation setting and better-than-expected execution.”

“If our thinking is correct, over the next few years, our valuation analyses argue for meaningful share appreciation potential,” Wise said, with a price target of $82.