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

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.

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.

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.