We recently reiterated our Neutral recommendation on
Philip Morris International
). Earnings of $1.27 per share in the first quarter of fiscal 2012
increased from the year-ago earnings of $1.06 per share and also
moved past the Zacks Consensus Estimate of $1.19.
Results were driven by favorable pricing and volume mix as well
as strong performance in Asia, Eastern Europe, Middle East &
Africa, and the European region.
The company recently announced a new share repurchase program of
$18.0 billion. This new plan is slated to start soon after the
completion of the ongoing $12 billion share buyback program, which
commenced in May 2010. The company has a target of buying back
shares worth $6.0 billion during 2012. The company continues to pay
its quarterly dividend regularly.
The company's strong brand portfolio of cigarettes is enriched
with popular names like Marlboro, L&M, Bond Street and
Parliament. Philip Morris is strengthening its brand portfolio
through innovations that are based on enhanced consumer
The L&M brand is being revitalized by the introduction of
products with a smoother taste and more attractive pack designs.
Furthermore, the portfolio of premium and high priced brands
(Parliament, Virginia Slims and Chesterfield) as well as the low
priced brands (Bond Street, Red & White, and Next) are being
further developed and expanded
Moreover, the company has a presence in a large number of
markets that provide it with a resilient long-term growth
opportunity despite macro-economic headwinds. It occupies a large
share in the emerging markets. Asia remains a growth engine for the
company with robust growth in Indonesia, China, Philippines and
Additionally, results in Japan continue to be resilient even
after post-tsunami troubles. We expect Asia to be instrumental in
the company's long-term growth. Further, through strategic
acquisitions like Sampoerna in Indonesia and Larkson in Pakistan,
the company has gained a strong foothold in the non OECD
(Organisation for Economic Co-operation and Development)
However, governments around the world are imposing restrictions
on tobacco companies to discourage smokers in their respective
countries, which in turn is denting cigarette consumption across
the world. The US Food and Drug Administration (FDA) has passed a
ruling that will compel tobacco companies to use strict warning
labels on cigarette packets to turn customers away from
Governmental actions that outlaw the use of tobacco products,
along with the diminishing social acceptance of smoking, will
adversely impact the company's volume in many markets.
Moreover, several retailers and importers have emerged who sell
fake versions of the company's top-branded cigarettes. Miami is one
of the top three areas and a hotbed of counterfeit cigarettes.
Apart from being fake, these cigarettes are far more injurious to
health than their real counterparts.
As per the lab findings of "The Organized Crime and Corruption
Reporting Project," fake cigarettes from China are reported to
contain 80% more nicotine and 130% more carbon monoxide, and
impurities that are harmful for health. This kind of trafficking
affects the company's reputation and revenue
Currently, Philip Morris carries a Zacks #3 Rank (short-term
PHILIP MORRIS (PM): Free Stock Analysis Report
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