Jefferies Gave Philip Morris International a ‘Hold’ Rating

Philip Morris International (PM) rose 2.7% to close at $101.53 per share during the third week of September 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.7%, 1.4%, and 17.9%, respectively, as of September 23, 2016.

PM is trading 1.4% above its 20-day moving average, 1.6% above its 50-day moving average, and 6.4% above its 200-day moving average.

The iShares Russell Top 200 Value (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 6.0% on September 23, 2016.

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

• Altria Group (MO): $125.7 billion
• Vector Group (VGR): $2.7 billion
• Reynolds American (RAI): $69.3 billion

Jefferies has initiated coverage of Philip Morris International with a “hold” rating and set the stock’s price target at $96 per share.

Philip Morris (PM) reported 2Q16 net revenues of $19.0 billion, a rise of 1.1% compared to $18.8 billion in 2Q15. Net revenues, which exclude excise taxes from the European Union, rose 4.6%.

Net revenues from EEMA (Eastern Europe, the Middle East, and Africa), Asia, and Latin America and Canada fell 9.9%, 0.6%, and 13.6%, respectively, in 2Q16 compared to 2Q15. PM’s cigarette shipment volume in the European Union, EEMA, Asia, and Latin America and Canada fell 0.8%, 4.0%, 7.9%, and 5.9%, respectively, in 2Q16 compared to 2Q15.

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

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

Philip Morris (PM) projects EPS of $4.45–$4.55, which doesn’t 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.

Philip Morris International has declared a quarterly dividend of $1.04 per share on its common stock. The dividend will be paid on October 13, 2016, to shareholders of record as of September 28, 2016.

Next, we’ll look at Altria Group (MO).