UBS maintains a Buy rating on 3M and raises the target price to US$218

Overview

UBS released an earnings review on 3M Company, maintaining its Buy rating and raising its 12-month target price from US$190 to US$218. The core view of the report is that 3M's 2Q results show management's long-term investments to reinvigorate growth are beginning to translate into financial results, with especially positive signals in organic growth, order momentum, new product pipeline, and profit improvement.

Core views

UBS believes market consensus underestimates 3M's earnings power by about 10%. 2Q organic sales growth was +5.4%, about 150 basis points above consensus expectations, and EPS was US$2.40, 7% above expectations. Management raised 2026 guidance to organic growth above 3.5% and EPS of US$8.80-8.95. UBS further raised its 2027 EPS forecast to US$10.46, assuming 5% organic growth, 35% core incremental margin, and US$600 million of net productivity improvement, partially offset by about US$300 million of incremental investment and stranded costs.

Analysis framework

The report uses an earnings review, upward earnings revision, and relative valuation framework: first assessing 2Q sales, margins, orders, and guidance changes; then incorporating the impact of the new product innovation pipeline on medium-term growth into 2027-2028 EPS forecasts; and finally valuing next 12 months EPS using a P/E multiple, while applying a conservative deduction for potential PFAS cash outflows.

Methodology notes

• Valuation methodsP/E valuation

  P/E valuation based on next 12 months EPS

  UBS applies a 24x multiple to its 2H27-1H28 EPS forecast, raising the multiple from the previous 23x to 24x to reflect improved organic growth at 3M, and believes the discount versus XLI's 25x should narrow.

• earnings_forecastEPS revision analysis

  Upward earnings revision and comparison with consensus

  UBS raised its 2027 EPS forecast to US$10.46, up from the previous US$10.02 and about 10% above market consensus of US$9.49.

• risk_adjustmentPFAS cash call deduction

  Legal risk valuation deduction

  The target price deducts US$30 per share to reflect potential PFAS cash outflows; UBS says the actual amount could be lower, but it uses a conservative assumption.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 3M Company (MMM.US)

  Core covered name

  Strengths

  Accelerating organic growth, 2Q sales and EPS beat expectations, continued order momentum, expanding new product pipeline, and management raised 2026 guidance.

  Weaknesses

  Still in the early stage of growth recovery, valuation has partially recovered with the stock price increase, and legal cash outflows and execution risk still require a discount.

  Comparison

  UBS believes 3M's improved growth performance supports a narrowing of the discount versus XLI's 25x valuation, and therefore raised the valuation multiple from 23x to 24x.

  Risks

  PFAS-related legal cash outflows, slower-than-expected growth recovery, weak market demand, poor execution, and changes in the macro cycle and regulation.

Key data

• 12-month ratingBuyUBS maintains its Buy rating.
• Target priceUS$218.00Previous value was US$190.00.
• Current priceUS$172.16Price date is July 21, 2026.
• Forecast share price upside26.6%Forecast dividend yield is 1.9%, and forecast total return is 28.5%.
• 2Q organic sales growth+5.4%About 150 basis points above market consensus expectations.
• 2Q EPSUS$2.407% above expectations.
• 2026 EPS guidanceUS$8.80-8.95Previous guidance was US$8.50-8.70, and market consensus was US$8.74.
• UBS 2027 EPS forecastUS$10.46Previously US$10.02, versus market consensus of US$9.49.
• New product planMore than 1,000 by 2027More than 350 new products are planned for launch in 2026.
• Valuation multiple24x NTM EPSPreviously 23x; XLI valuation is about 25x.

Impact & implications

If UBS's view proves correct, 3M may be in the early stage of a multi-year acceleration in growth, with room for further upward revisions to market earnings expectations and potential narrowing of its valuation discount. The near-term earnings beat and raised 2026 guidance strengthen visibility into the growth recovery; over the medium term, the 2-3 year maturation cycle of new products may support mid-single-digit growth through the cycle.

Risks

• Litigation-related cash outflows such as PFAS may be higher than estimated.
• Progress in the growth recovery may be slower than expected.
• Execution missteps or weaker-than-expected commercialization of new products.
• End markets such as industrial, transportation, electronics, construction, and energy are cyclical, and a weaker macro environment could suppress demand.
• Changes in exchange rates, interest rates, commodity price inflation, tariffs, and environmental regulation may affect earnings.
• Capacity and pricing pressure may create risks during the cycle.

What to watch

• Whether 2H26 EPS can exceed the level implied by guidance.
• Whether organic sales growth can sustain a mid-single-digit trend.
• The number of new product launches and their contribution to revenue growth over a 2-3 year maturation cycle.
• Whether market consensus moves closer to UBS's 2027 EPS forecast.
• Progress on PFAS-related cash outflows and other legal matters.
• Whether order momentum in general industrial, safety, and data centers can continue.