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On Monday, Piper Sandler analyst Jason Bednar upgraded Solventum (NYSE: SOLV) stock rating from Neutral to Overweight and increased the price target to $87 from the previous $78. Currently trading at $74.11 with a market capitalization of $12.8 billion, the stock has caught attention from value and growth at a reasonable price (GARP) investors. According to InvestingPro data, six analysts have recently revised their earnings estimates upward for the upcoming period.
The upgrade follows Solventum’s recent first-quarter performance, which Bednar noted had exceeded expectations. The company reported robust revenue of $8.3 billion with an impressive gross margin of 54.9%. Alongside the strong top-line results, clarity regarding tariff risks was provided during the first-quarter earnings call. The easing of U.S./China tariffs has lessened these risks, contributing to the analyst’s more favorable view of the stock.
Bednar highlighted that Solventum’s growth trajectory seems promising, with expectations of a gradual increase in top-line growth. He also pointed out that the company’s margins are set to improve consistently, thanks to various internal actions, including restructuring, TSA exits, and separation initiatives from 3M. InvestingPro analysis shows the company maintains a "GOOD" Financial Health score, though it currently trades above its calculated Fair Value.
The sale of Solventum’s Products & Filtration (P&F) division to Thermo Fisher (NYSE:TMO) for $4.1 billion was also a significant factor in the upgrade. This divestiture is expected to substantially increase Solventum’s capital allocation flexibility.
Bednar’s comments reflect optimism about Solventum’s future financial performance and strategic moves. "We see SOLV as a stock worthy of attention from value/GARP investors as top-line growth is likely on a slow climb higher, margins have a path paved for consistent improvement given a host of internal actions in motion, and capital allocation flexibility will increase meaningfully following the $4.1B sale of P&F to TMO," he stated.
In other recent news, Solventum Corp reported mixed results for its first quarter of 2025. The company’s adjusted earnings per share (EPS) came in at $1.34, missing the forecasted $1.57, while revenue matched expectations at $2.1 billion. Despite the earnings miss, Solventum experienced a 4.3% organic sales growth, driven by strong demand in bioprocessing solutions and new product launches in its MedSurg and Dental Solutions segments. The company also reported a decline in gross margins by 260 basis points year-over-year, settling at 55.6%. Solventum maintains its full-year EPS guidance of $5.45 to $5.65 and expects organic sales growth of 1.5% to 2.5%. The company is preparing for tariff headwinds estimated to impact profitability by $80-$100 million in 2025. Additionally, Solventum plans to complete the divestiture of its Purification and Filtration segment by the end of 2025. Despite these challenges, CEO Brian Hansen expressed optimism about the company’s strategic focus and proactive measures to navigate the evolving geopolitical landscape.
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