Al Root

Activist investor Trian Fund Management sent shares of Solventum, the healthcare company spun out of 3M in 2024, higher on Wednesday.

Solventum stock jumped almost 5% from its daily low, leaving it up about 2.1% at $70.85 in midday trading. The S&P 500 and Dow Jones Industrial Average were down 0.3% and 0.4%, respectively.

The activist firm, founded by Nelson Peltz, said the stock is trading at a discount to peers, according to CNBC. Trian and Solventum didn't immediately respond to requests for comment.

Trian has a point. Solventum trades for about 12 times estimated 2025 earnings per share, while the company's healthcare peers change hands for roughly 13 to 16 times. 3M trades for about 16 times, and the S&P 500 sells for about 22 times.

The activist fund has been invested in the healthcare supplier for a while. Trian disclosed an initial Solventum stake in July. According to recent filings, it holds about 7.1 million shares, or about 4% of the stock outstanding.

When it disclosed the initial stake, Trian said it "believes [Solventum] can unlock its potential through re-accelerating organic growth, restoring margins while investing to drive growth, and simplifying the company's portfolio of businesses," adding it "looks forward to engaging constructively with Solventum's management and board."

Solventum shares have been roughly flat since the spinoff was completed on April 1, while the S&P 500 gained about 12% over the same span. Solventum shares traded as low as about $48 in the summer and as high as about $75 in the fall. The Trian news helped to lift the shares from their low point.

Overall, just one analyst, or 8% of those covering the stock, rates shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Solventum stock is about $74, implying a potential gain of about 8% from recent levels.

One reasons for the low multiple and weak analyst sentiment is growth. Sales are expected to increase about 1% a year on average between 2025 and 2027, while earnings are expected to grow about 6% a year over that span.

Both rates fall below expectations for the S&P 500.

Write to Al Root at allen.root@dowjones.com

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January 08, 2025 13:21 ET (18:21 GMT)

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