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5. Solventum Corp. (NYSE:SOLV)

Forward Price-to-Earnings Ratio: 11.85

Market Cap as of October 1: $12.04 billion

Number of Hedge Fund Holders: 37

Solventum Corp. (NYSE:SOLV) is a healthcare company, spun off from 3M in April this year, that offers a range of products and services, specializing in 4 main segments: medical solutions, oral care, health information systems, filtration and engineering, and patient and consumer solutions. It emphasizes innovation, patient-centricity, and efficiency in its approach to developing and delivering its products and services, working closely with healthcare professionals.

The company has a 3-phased approach that focuses on stabilizing the business, repositioning for growth, and optimizing the portfolio. Phase 1 focuses on establishing a new mission, acquiring talent, and restructuring for agility while managing the separation from 3M.

The separation efforts involve relocating manufacturing lines from 67 plants to 29 Solventum plants, including 2 new plants currently under construction. The company is also restructuring its distribution and supply chain by reducing the number of distribution centers from 122 to 73. The rebranding efforts are extensive, spanning over 90 countries, and management has adjusted the commercial distribution models in over 60 countries.

Revenue in Q2 2024 came out at $2.08 billion. MedSurg segment was up 1.8% year-over-year, driven by negative pressure wound therapy and antimicrobial IV site management solutions. Dental segment revenue was down 2%, due to volume pressures from challenging market conditions. HIS segment was up 3.6%, fueled by the adoption of 360 Encompass and steady performance management solutions. The Purification and Filtration segment was down 0.9%, impacted by performance in drinking water filtration.

Its initiatives to streamline its SKU portfolio and improve margins demonstrate a strong focus on operational efficiency. The company’s progress in identifying and eliminating SKUs positions it well for future growth and improved profitability.