Why 3M Stock Jumped Today

Shares of 3M (NYSE: MMM) were popping today after the industrial conglomerate announced a surprise change in its leadership.

The company, which makes everything from Scotch tape to medical equipment, said William Brown will be its new CEO, effective May 1, replacing Michael Roman, who will transition to the executive chairman position.

Investors responded well to the news as 3M stock had struggled in recent years amid macroeconomic headwinds and two multibillion-dollar class action lawsuits.

As of 10:39 a.m. ET, the stock was up 4.6% on the news.

Image source: 3M.

3M gets a fresh face

Current CEO Roman is 63, so he’s nearing retirement age, but the transition seems designed to bring in a turnaround specialist, rather than send Roman off on his golden years. Brown comes from outside the company, having previously led L3Harris Technologies, a defense contractor. In a statement, Roman said, “Bill’s strong track record as a CEO for a global technology company makes him the right leader for 3M,” and noted his experience in strategic leadership, innovation, and operational excellence. He also held various leadership positions at United Technologies earlier in his career.

Brown will take over a slimmed-down version of 3M as the conglomerate is set to spin off its healthcare division on April 1, and one of his first tough decisions will be whether to cut the company’s dividend after the spin-off goes through as 3M contends with billions in legal payments and sluggish growth.

Investors are also hopeful that Brown can help restart 3M’s innovation engine as investors and employees have complained that the company is no longer as forward-thinking as it once was.

Is 3M a buy?

Today’s gain in the stock seems to be a reflection of investor desperation as a jump on a CEO change generally signals frustration with the existing CEO. However, 3M’s problems won’t be easy to fix. The legal settlements aren’t going away, and overhauling the culture is no small feat, especially at a time when big tech and artificial intelligence are attracting the brightest minds in science.

Investors should give Brown some time to put together a turnaround plan before piling into the stock.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends 3M. The Motley Fool has a disclosure policy.

Why 3M Stock Jumped Today was originally published by The Motley Fool