3M's (MMM) in-line Q4 results and 2025 guidance were well-received by investors, but environmental liabilities from per- and polyfluoroalkyl substances, or PFAS, remain a concern, RBC Capital Markets said in a note Tuesday.

Analysts, including Deane Dray, said that the upcoming analyst day has "potential to be a modest positive catalyst" as investors are expected to get more details on operational improvements, medium-term goals, and demonstrations of key research and development projects. However, the analysts caution that 3M still faces significant unresolved PFAS liabilities, potentially worth billions of dollars.

The company's legal exposure related to PFAS primarily comes from product liability due to secondary contamination caused by selling PFAS-containing products. 3M has been named in over 300 individual and class action lawsuits related to PFAS environmental and product liabilities, the analysts said.

"That said, the complex and broadly defined nature of these lawsuits limits 3M's ability to begin accruing reserves for its future liability, as it fails to meet the legal prerequisite of being 'probable and estimable' based on the company's judgment," the analysts added.

The analysts said they are increasing their 2025 earnings per share estimate to $7.75 and introducing 2026 estimates, but their $96 price target remains unchanged. The brokerage also maintained its underperform rating on 3M.

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