Philip Morris International Inc. (PM) operates as a tobacco company working to deliver a smoke-free future and evolving portfolio for the long-term to include products outside of the tobacco and nicotine sector. The company’s product portfolio primarily consists of cigarettes and smoke-free products sold in markets outside the U.S.
PM has raised dividends for 13 consecutive years. Its annual dividend of $5.00 yields 5.47% on prevailing prices. The company’s dividend payouts have increased at a CAGR of 3.1% over the past three years and a CAGR of 3.8% over the past five years. Its four-year average yield is 5.50%.
On July 21, 2022, Jacek Olczak, CEO, said, “We are raising our outlook for the full year and now expect to deliver pro forma adjusted growth in net revenues of 6% to 8%, on an organic basis, and diluted EPS of 10% to 12%, excluding currency, underpinned by pro-forma heated tobacco unit shipment volume of 90 to 92 billion units.”
PM has lost 5.4% year-to-date and 8.3% over the past month to close the last trading session at $89.83.
Here is what could shape PM’s performance in the near term:
Strong Sales
For the second quarter ended June 30, 2022, PM’s net revenues increased 3.1% year-over-year to $7.83 billion. It shipped 16.08 billion units of cigarettes to the Americas, up 5.7% year-over-year.
Moreover, the company shipped 34.54 billion units of cigarettes to the Middle East & Africa, up 13.8% year-over-year, while it shipped 1.16 billion units of heated tobacco to the same region, up 126.2% year-over-year.
Solid Profit Margins
PM’s trailing-12-month gross profit margin of 67.25% is 106.7% higher than the industry average of 32.53%. Its trailing-12-month net income margin of 28.58% is 441.2% higher than the industry average of 5.28%.
Furthermore, PM’s trailing-12-month EBITDA margin of 44.21% is 264.1% higher than the industry average of 12.14%. Also, its trailing-12-month ROTC and ROTA of 39.50% and 21.62% compare with the industry averages of 6.43% and 4.74%, respectively.
Consensus Rating and Price Target Indicate Potential Upside.
Among the seven Wall Street analysts that rated PM, four rated it Buy, while three rated it Hold. Wall Street analysts expect the stock to hit $107.86 in the near term, indicating a potential upside of 20.1%.
POWR Ratings Reflect Promising Outlook
PM has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality, consistent with its higher-than-industry profit margins.
The stock has a B grade for Stability, in sync with its 24-month beta of 0.53.
In the 10-stock Tobacco industry, PM is ranked #4. The industry is rated A.
Click here for the additional POWR Ratings for PM (Growth, Value, Momentum, and Sentiment).
View all the top stocks in the Tobacco industry here.
Bottom Line
PM’s more than 5% dividend yield could provide a stable income stream amid the ongoing market turmoil. Moreover, its EPS is expected to grow 2.3% per annum for the next five years. And, given its solid profit margins, it could be worth buying the stock now.
How Does Philip Morris International Inc. (PM) Stack Up Against its Peers?
While PM has an overall POWR Rating of B, one might consider looking at its industry peers, Japan Tobacco Inc. (JAPAY), Imperial Brands PLC (IMBBY), and Vector Group Ltd. (VGR), which have an overall B (Buy) rating.
PM shares were trading at $93.33 per share on Thursday afternoon, up $3.50 (+3.90%). Year-to-date, PM has gained 0.82%, versus a -15.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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