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  "documentTitle": "Solventum Corporation (SOLV)",
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  "authorName": "Trian Fund Management",
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  "presentationDate": "2025-01-08 00:00:00",
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  "notes": "The slide argues that management is setting low bars to ensure easy beats, contrasting this with historical 3M performance and industry-wide spin-off margin expansion data.",
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      "text": "We would understand if margins declined due to investments in growth, but organic growth is worse than when Solventum was inside of 3M, and the Company has not created an expectation for improvement.",
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      "text": "Q2 2024: 1% organic growth, (530bps) of EBIT margin compression; Q3 2024: 0% organic growth, (320bps) of EBIT margin compression",
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      "text": "organic growth: 0.5%",
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      "text": "Within that group of 31 spin-outs, the average company saw approximately +125bps of margin improvement in its first full fiscal year. Consensus calls for (425bps) of margin decline for Solventum, which would make it the third worst performing spin.",
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      "text": "We find this performance step-down hard to comprehend. Solventum's core hospital end markets are growing faster today than they had during many of the historical periods in which the entity delivered 3-4% growth inside of 3M.",
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      "text": "We hope that this unprecedented performance decline does not inform the starting point of the LRP. The reality is that over any reasonable multi-year time period, the business grew 3% to 4% organically at a 26%-27% EBIT margin inside of 3M.",
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      "text": "The Company has occasionally blamed the spin itself for why performance is suffering. To put Solventum's expected margin decline in context, we analyzed the adjusted profit margin progression for U.S. primary listed spun companies.",
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      "text": "Some have characterized Solventum's positioning to the public markets as setting management up to 'beat and raise'. We too believe management teams should guide conservatively and exceed expectations – but there must be an element of reasonableness.",
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      "text": "Consensus Forecasts (2024E-2026E) vs 3MHC Historical Averages (3yr, 5yr, 10yr, 20yr) for Sales, Organic Growth, Adj. EBIT, Margin, and EPS.",
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