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Philip Morris Plans to Increase Market Share of iQOS

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Price movement

Philip Morris International (PM) has a market cap of $153.4 billion. It rose by 0.14% to close at $99 per share on August 12, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.07%, -4.1%, and 15.0%, respectively, on the same day. PM is trading 0.64% below its 20-day moving average, 1.2% below its 50-day moving average, and 6.3% 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 6.5% on August 12.

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

  • Altria Group (MO) — $130.4 billion
  • Reynolds American (RAI) — $71.5 billion
  • Vector Group (VGR) — $2.7 billion

Latest news on Philip Morris

In a press release on August 12, 2016, Reuters reported that Philip Morris International “says its e-cigarette has rapidly captured close to 3% of Japanese tobacco sales, making inroads into a market Japan Tobacco (JT) relies on for 40 percent of its profit.” It added that “in what may be an early vindication of Philip Morris’s e-cigarette strategy, the iQOS accounted for 2.2 percent of Japan’s tobacco sales in the quarter ended June 30, a company spokesman said.”

Philip Morris can increase the supply of iQOS to meet the demand and increase the market share and revenue. It is planning to increase the sales of iQOS in 20 countries.

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Performance of Philip Morris in 2Q16

Philip Morris reported 2Q16 net revenues of $19.0 billion, a rise of 1.1% over the net revenues of $18.8 billion in 2Q15. Net revenues, which exclude excise taxes from the European Union, rose by 4.6%. Net revenues from EEMA (Eastern Europe, the Middle East, and Africa), Asia, and Latin America and Canada fell by 9.9%, 0.6%, and 13.6%, respectively, between 2Q15 and 2Q16. Its cigarette shipment volume in the European Union, EEMA, Asia, and Latin America and Canada fell by 0.8%, 4.0%, 7.9%, and 5.9%, respectively.

The company’s gross profit margin and operating income fell by 5.8% and 4.8%, respectively, between 2Q15 and 2Q16. Its net income and EPS (earnings per share) fell to $1.8 billion and $1.15, respectively, in 2Q16, compared with $1.9 billion and $1.21, respectively, in 2Q15.

PM’s cash and cash equivalents rose by 11.6% between 4Q15 and 2Q16. The company reported a free cash flow excluding currency of $2.7 billion in 2Q16, a fall of 22.9% from 2Q15.

The company projects EPS in the range of $4.45–$4.55, which do not include any share repurchases in 2016. This projection also excludes the impact of any future acquisitions, future changes in currency exchange rates, unanticipated asset impairment and exit cost charges, and any unusual events. In the next part, we’ll take a look at Decker Outdoor.

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