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In a busy morning 3M announces healthcare spin off, mixed earnings and subsidiary’s voluntary bankruptcy

3M Co. was busy before market open Tuesday, announcing the planned spinoff of its healthcare business, second-quarter results, and the voluntary bankruptcy of the company’s Aearo Technologies subsidiary.

Buoyed by the flurry of announcements, shares of 3M Co. MMM, +7.12% shot up as much as 8.6% to an intraday high of $145.70 moments after the open, before paring gains to be up 4.9% in morning trading.

With the spinoff of its healthcare business, 3M will create two listed companies. “Today’s actions advance our ability to create value for customers and shareholders,” said 3M Chief Executive Officer Mike Roman, in a statement.

The “new 3M” will remain “a leading global material science innovator,” the company said, while “Health Care” will be a “diversified healthcare technology leader.” The spinoff will provide leadership in segments such as wound care, oral care, healthcare IT, and biopharma filtration, according to 3M.

See Now: 3M to spin off health care business and create two listed companies

The new 3M had sales of $26.8 billion in 2021, while Health Care had sales of approximately $8.61 billion in the same period. 3M expects to complete the spinoff by the end of 2023.

3M also reported its second-quarter results on Tuesday, posting net income of $78 million, or 14 cents a share, compared with $1.5 billion, or $2.59 a share, in the same period last year. However, the company took a $1.2 billion pre-tax charge related to the resolution of litigation involving Combat Arms Earplugs.

On an adjusted basis, 3M reported earnings of $2.48 a share, down from $2.75 a share in the prior year’s quarter. The FactSet earnings consensus was $2.65 a share.

See Now: 3M to spin off health care business and create two listed companies

The company reported sales of $8.70 billion, down 2.8% from $8.95 billion in the year-ago quarter, reflecting a negative 4 percentage point impact from foreign exchange rates. 3M’s sales were above the FactSet consensus of $8.57 billion.

3M also cut its full-year sales and earnings expectations, citing the impact of the strong U.S. dollar and an uncertain macroeconomic environment. The company now expects sales to decline 2.5% to 0.5% from a year ago, compared with its prior forecast for growth of 1% to 4%. 3M now anticipates $10.30 to $10.80 in full-year adjusted EPS, compared with its prior forecast for $10.75 to $11.25.

In a separate announcement, 3M said its Aearo Technologies subsidiary and related entities have voluntarily filed for bankruptcy, a move that aims to resolve litigation related to Combat Arms Earplugs. In a statement, 3M said that it has committed $1 billion to fund a trust to resolve all claims.

See Now: 3M subsidiary Aearo Technologies files for bankruptcy as it looks to resolve Combat Arms Earplugs litigation

3M shares have fallen 20.8% this year, while the Dow Jones Industrial Average DJIA, -0.50%, of which 3M is a components, has lost 12.2%.

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