3M’s Solventum Spinoff Results in Modest Model Updates, RBC Capital Markets Says

3M’s (MMM) successful spinoff of healthcare business Solventum resulted in modest updates to its model, RBC Capital Markets said in a note Monday.

The company raised its Q1 earnings per share guidance last month to $2.05-$2.20 from $2.00-$2.15. The increase in the company’s EPS estimate is due to the interest income on the $7.7 billion financing ahead of the Solventum spinoff, according to the note.

The firm said it is also adding back $150 million to $175 million of annual stranded costs into the updated model along with income and costs associated with Solventum transition service agreements.

RBC expects that 3M will hold onto and generate interest on the dividend Solventum paid to the company.

The firms said a sum of part valuation of 3M including the unaddressed per- and polyfluoroalkyl substances liability shows a 15% downside to the company’s shares.

RBC reduced the price target on 3M’s stock to $78 from $84 and reiterated its underperform rating.

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