3M’s Quiet Turnaround Is Beating Plan, But Old Risks Linger

3M’s operational turnaround is running ahead of schedule, and for patient investors in the century-old industrial giant, the numbers are hard to ignore. CEO William Brown told investors this week that on-time delivery has climbed from the low-80% range to roughly 90%, new product launches have more than doubled from 125 three years ago to 284 last year — with over 350 expected this year — and new products now account for a rising share of sales, on track to reach roughly 20% by 2027 versus about 11% when Brown took over. Second-quarter adjusted organic sales growth came in at 5.4%, and management is now targeting an operating margin above 25% by 2027.

There’s a genuine growth angle layered on top of the cleanup: 3M’s expanded-beam optical technology has become a data-center standard for Microsoft, opening a market Brown pegs at nearly $2 billion. That’s a small but real diversification story for a conglomerate too often dismissed as legacy industrial ballast.

The catch is a legal overhang that refuses to fully clear. A Montana federal judge recently declined — without prejudice — to dismiss a nationwide PFAS class action tied to firefighter turnout gear, and the Australian government is separately pursuing more than A$2 billion in damages over alleged misrepresentation of PFAS risks. That sits on top of 3M’s existing $10.5–$12.5 billion U.S. settlement covering public water system claims. Management’s framing that legal risk is “better defined” keeps colliding with fresh filings in fresh jurisdictions.

Institutional money seems to be leaning toward the operational story regardless: hedge fund ownership climbed from 63 funds at the end of Q1 2026 to 72 by the end of Q2, while short interest sits low at just 1.79% of float. So what for long-term investors: 3M looks like a case where the operating metrics are healing faster than the narrative admits, but real tail risk from PFAS litigation hasn’t been priced away entirely — meaning the actual margin of safety here depends on how much of that legal uncertainty the market has already discounted into today’s valuation.