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Shares rose over 4.5% in pre-market Monday. Bloomberg News first reported about the tentative agreement.
While investors are likely to wait for the official announcement, BofA analysts say the settlement “would be a material positive for 3M, coming in at the low end of estimates per reports.”
Some analysts, including those at Barclays, expected 3M to pay at least $8B to settle lawsuits.
“The headline settlement of $5.5bn would be materially lower than the $10-15bn range from experts cited by the Wall Street Journal. However, we believe investor expectations were between $5-7bn, so this settlement would be at the lower end of expectations,” BofA analysts said in a client note.
3M previously agreed to settle with public water suppliers on the so-called “forever chemicals.”
“We view the settlement as delayed but expect it to be settled shortly after adjustments in wording,” the analysts added.
“We note that all the settlements so far have been below the Street’s expectations. We maintain our Neutral rating as it balances 3M’s low valuation and improving execution with litigation risk.”
