3M’s Healthcare Spinoff Scheduled for April 1: Is the New Stock Worth Investing In?

3M’s Healthcare Spinoff Scheduled for April 1: Is the New Stock Worth Investing In?

Healthcare investors will soon have a new stock to invest in. 3M (NYSE:MMM) is in the process of spinning off its healthcare business and the stock is expected to go public on April 1. Called Solventum, it will trade on the New York Stock Exchange under the symbol SOLV.

The healthcare sector is one of the fastest growing segments of this large conglomerate, and it could be an attractive option for investors next month. Is the new stock one you should consider adding to your portfolio?

Solventum key details

The name Solventum comes from two words: “resolution” and “momentum”. It is meant to highlight the company’s goal to continue to innovate and offer new and improved products. Medical devices will play a key role in its future growth, but Solventum will also offer investors a way to benefit from its expansion into other markets, including oral care and health information systems, making it will make a more diversified investment option than others. health care actions.

In 2023, 3M’s healthcare business generated net revenue of $8.2 billion and operating income of $1.6 billion, resulting in an impressive operating margin of nearly 20%. Last year, turnover fell by 2.8%. But one of the main reasons was due to divestitures, with 3M selling its local dental anesthetics business and spinning off its food safety segment a year earlier. Organically, the health division saw an organic growth of 0.7% in 2023. And in the previous year, its organic growth was 3.2%.

Why Solventum could be an interesting buy for investors

What is promising about Solventum is the diversity of its operations, as this could lead to various growth opportunities in the future. Being part of a large conglomerate, it can be difficult for one segment to thrive and focus on its long-term potential. But as a separate entity, the focus will be more on growing the business. And with a potential global market worth up to $93 billion, there should be no shortage of growth potential for Solventum in the future.

The company projects that in the health information systems division, its expansion rate will be between 6% and 8% through 2026. And even in its slower-growing medical-surgical business, which includes its medical devices and products, turnover is expected to increase between 3% and 5%.

While Solventum doesn’t appear to have the makings of a fast-growth company, few healthcare companies fit that type of mold. Last year, General Electric swarmed GE Health, and the relatively new healthcare stock has since posted a 50% gain (even though the company’s revenue is only up 7% in 2023). Solventum may not necessarily perform as impressively, but it reminds investors that a company doesn’t need to project high growth rates to be a good investment.

Should you invest in Solventum?

Solventum will be an interesting healthcare stock to consider when it hits the market next month, but I would wait until the company has a few quarterly earnings reports under its belt before determining whether this purchase is worth it. At this point, the dust from the spin-off will have settled and investors should be able to have a good understanding of how the company is doing as its own entity.

This is a stock worth watching, but it’s not a stock that investors should worry about buying right away.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends 3M. The Mad Motley has a disclosure policy.

3M’s healthcare spinoff is scheduled for April 1. Should you buy the new shares? was originally published by The Motley Fool

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