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3M's (MMM) Earplug Suits to Proceed, Averting Bankruptcy Rules

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Despite the bankruptcy of its subsidiary, 3M Company (MMM - Free Report) has been denied a preliminary injunction to more than 230,000 lawsuits the company is facing on account of allegedly selling defective combat earplugs. Following the ruling by a U.S. judge on Friday, shares of the company fell 9.5% at the close of business on Aug 26.

Last month, MMM’s subsidiary Aearo Technologies LLC, which developed the combat arms earplugs to be supplied to the U.S. military, filed for bankruptcy protection in Indiana. Per rules, companies that file for bankruptcy usually get some respite from lawsuits.

Per a Bloomberg report, U.S. Bankruptcy Judge Jeffrey J. Graham wrote, “Admittedly, it is tempting to be swayed by the sheer size of the MDL [multi-district litigation] at issue in this case, but that alone provides insufficient reason for the court to conclude that an injunction is necessary.”

While veterans claim that combat earplugs caused them hearing loss, 3M contends that the earplugs offered protection to soldiers while allowing them to hear on the battlefield.

Per reports, so far 3M has lost in 10 of the 16 trials, with about $300 million being awarded to plaintiffs. Aearo has placed $1 billion in a trust to compensate veterans and settle the lawsuits. 3M and Aearo intend to appeal the court’s decision on the lawsuits.

Zacks Rank & Key Picks

3M carries a Zacks Rank #3 (Hold).

Some better-ranked stocks within the Conglomerates sector are as follows:

Carlisle Companies (CSL - Free Report) sports a Zacks Rank #1 (Strong Buy). CSL pulled off a trailing four-quarter earnings surprise of 28%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

Carlisle Companies has an estimated earnings growth rate of 114.2% for the current year. Shares of CSL have rallied more than 22% in the year-to-date period.

Griffon Corporation (GFF - Free Report) carries a Zacks Rank #2 (Buy). GFF delivered a trailing four-quarter earnings surprise of 104.6%, on average.

Griffon has an estimated earnings growth rate of 124.1% for the current year. Shares of GFF have gained more than 13% so far this year.

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