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JPMorgan Chase Upgrades Philip Morris to ‘Overweight’

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Jun. 20 2016, Published 2:53 p.m. ET

Price movement of Philip Morris

Philip Morris International (PM) has a market cap of $156.1 billion. It rose by 0.58% to close at $100.73 per share on June 17, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -0.56%, 1.8%, and 15.8%, respectively, that day. This means that PM is trading 0.98% above its 20-day moving average, 1.1% above its 50-day moving average, and 12.0% above its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Value ETF (IWX) invests 0.99% of its holdings in Philip Morris. The ETF tracks an index of US large-cap value stocks. The index selects from stocks ranked 1–200 by market cap based on two style factors. The YTD price movement of IWX was 2.3% on June 8, 2016.

The market caps of Philip Morris’s competitors are as follows:

  • Altria Group (MO): $129.0 billion
  • Reynolds American (RAI): $72.2 billion
  • Vector Group (VGR): $2.8 billion

Philip Morris’s rating

JPMorgan Chase has upgraded Philip Morris’s rating to “overweight” from “neutral” and set the stock price target at $112 per share.

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Performance of Philip Morris in fiscal 1Q16

Philip Morris reported fiscal 1Q16 net revenues of $16.8 billion, a fall of 3.3% from the net revenues of $17.4 billion in fiscal 1Q15. In fiscal 1Q16, net revenues from the European Union, EEMA (Eastern Europe, the Middle East, and Africa), Asia, and Latin America and Canada segments fell by 4.5%, 10.2%, 8.7%, and 10.5%, respectively, from the corresponding period last year. The company’s gross profit and operating income fell by 9.1% and 13.9%, respectively, between fiscal 1Q16 and the prior year.

The company’s net income and EPS (earnings per share) fell to $1.5 billion and $0.98, respectively, in fiscal 1Q16, compared with $1.8 million and $1.16 in fiscal 1Q15.

Philip Morris’s cash and cash equivalents fell by 13.8% between fiscals 4Q15 and 1Q16. It reported a free cash flow of $236.0 million in fiscal 1Q16, compared with -$578.0 million in fiscal 1Q15.

Quarterly dividend

Philip Morris International has declared a regular quarterly dividend of $1.02 per share on its common stock. The dividend will be paid on July 11, 2016, to shareholders of record at the close of business on June 23, 2016.

Projections

The company has made the following projections for fiscal 2016:

  • EPS in the range of $4.40 to $4.50, which doesn’t include share repurchases
  • a ~2.0% to 2.5% decline in international cigarette volume, which excludes China and the United States

These projections do not include the impact of future acquisitions, unanticipated asset impairment and exit cost charges, future changes in currency exchange rates, or any unusual events. In the next part of this series, we’ll discuss GoPro.

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