Shares of Philip Morris Int'l (PM) Look Cheap -Barron's
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Shares of Philip Morris International (NYSE: PM) have opened trading only slightly higher this morning despite a bullish Barron's piece which is being highlighted as the publications top article today. The stock is currently up 0.78% to $35.00.
The article contends that shares of Philip Morris International are being unfairly priced given its defensive nature and strong growth prospects. Shares of Philip Morris have fallen 38% since hitting a 52-week high at $56.26 on August 12. Also, since pricing its IPO in March, the stock's earnings multiple has fallen from 16x forward earnings to 11.1x.
Fundamentals within Philip Morris International have not followed a similar trend that its stock price has, however; the company pays a 6% dividend yield, controls about 16% of the tobacco market outside the US, has rising free cash flow which will support $5.4 billion in buybacks and a proposed $500 million in cost savings this year.
As Barron's put its, the real question is: "Can a recession force people to go back to smoking discount tobacco after lighting up premium cigarettes?" While the thought is concerning, especially considering a weakening dollar which has created headwinds for the international cigarette maker, Philip Morris Int'l has yet to see signs of such a trend. And in case this does happen, the company purchased several mid- and low-priced cigarette makers, providing what one analyst calls a "strong safety net".
Despite a dominant hold on the foreign markets, Barron's points out that Philip Morris Int'l has a lot of room to grow. The tightly regulated Chinese market has been relatively untouched by the company, but due to a joint venture with China National Tobacco, PMI is beginning to sell cigarettes in this market.
The article concludes with a quote from a bullish portfolio manager: "When you can get a stable franchise anytime under 12 times earnings, I say pick it up instantly."
The article contends that shares of Philip Morris International are being unfairly priced given its defensive nature and strong growth prospects. Shares of Philip Morris have fallen 38% since hitting a 52-week high at $56.26 on August 12. Also, since pricing its IPO in March, the stock's earnings multiple has fallen from 16x forward earnings to 11.1x.
Fundamentals within Philip Morris International have not followed a similar trend that its stock price has, however; the company pays a 6% dividend yield, controls about 16% of the tobacco market outside the US, has rising free cash flow which will support $5.4 billion in buybacks and a proposed $500 million in cost savings this year.
As Barron's put its, the real question is: "Can a recession force people to go back to smoking discount tobacco after lighting up premium cigarettes?" While the thought is concerning, especially considering a weakening dollar which has created headwinds for the international cigarette maker, Philip Morris Int'l has yet to see signs of such a trend. And in case this does happen, the company purchased several mid- and low-priced cigarette makers, providing what one analyst calls a "strong safety net".
Despite a dominant hold on the foreign markets, Barron's points out that Philip Morris Int'l has a lot of room to grow. The tightly regulated Chinese market has been relatively untouched by the company, but due to a joint venture with China National Tobacco, PMI is beginning to sell cigarettes in this market.
The article concludes with a quote from a bullish portfolio manager: "When you can get a stable franchise anytime under 12 times earnings, I say pick it up instantly."
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