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Can Philip Morris’s Stock Maintain Its Peak after 2Q16 Results?

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Jul. 14 2016, Updated 8:08 a.m. ET

Two-year peak

Philip Morris (PM) is set to release its 2Q16 results when the Market opens on July 19, 2016. Philip Morris was trading at $103.38 on July 11, 2016. The stock price is trading at its two-year peak and is up by 27.6% since January 2015.

Philip Morris’s stock price fell by 1.3% to $99.28 after it released its 1Q16 earnings.

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Stock movement versus peers

Philip Morris’s (PM) stock has seen volatility since the start of 2015. On June 24, 2016, after the Brexit vote, PM’s stock fell by 4.1%. Philip Morris has more risk exposure compared to other tobacco companies, as it generated 30.1% of its revenue from the European Union in 2015.

The stock prices of peers Altria Group (MO) and Reynolds American (RAI) rose by 42.7% and 66.7%, respectively, since January 2015. On September 29, 2016, RAI’s stock gained momentum after the announcement of the asset sale to Japan Tobacco (JAPAY) (JAPAF) for $5 billion. RAI has risen by 22.4% since then.

Vector Group (VGR) and British American Tobacco (BTI) have also witnessed an upward movement of 10.2% and 20.6%, respectively, since the start of 2015. The benchmark S&P 500 Index (SPY) (IVV) (VOO) is also up by 3.8% since 2015.

Tobacco stocks

In 1Q16, Philip Morris (PM) declared a regular quarterly dividend of $1.02, representing an annualized rate of $4.08 per common share. Since the spin-off from Altria Group (MO), PM has increased the quarterly dividend by 121.7% from the initial annualized rate of $1.84 per common share. This represents a compound annual growth rate of 12.0%.

After the Brexit vote, Cowen & Company analysts stated, “We expect that investors will view global tobacco as a relatively safe haven in a risk-off environment.”

Philip Morris is focused on reducing costs for revenue growth, as some investors consider tobacco stocks to be safer compared to other industries.

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