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CLSA Upgrades Philip Morris International to a ‘Buy’

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Nov. 16 2016, Updated 10:05 a.m. ET

Price movement

Philip Morris International (PM) has a market cap of $141.2 billion. It fell 1.8% to close at $87.33 per share on November 14, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -10.3%, -8.9%, and 2.5%, respectively, on the same day.

Philip Morris is trading 8.6% below its 20-day moving average, 10.0% below its 50-day moving average, and 9.5% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Value ETF (IWX) invests 2.0% 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 8.6% on November 14.

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

  • Altria Group (MO) — $123.8 billion
  • Reynolds American (RAI) — $78.3 billion
  • Vector Group (VGR) — $2.8 billion

PM’s rating

On November 14, 2016, CLSA has upgraded Philip Morris International’s rating to a “buy” from “outperform” and also set the stock’s price target at $105.00 per share.

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Performance of Philip Morris in 3Q16

Philip Morris (PM) reported 3Q16 net revenue of $19.9 billion, a rise of 2.6% over the net revenue of $19.4 billion in 3Q15. Excluding excise taxes, net revenue from the European Union and Asia rose 3.6% and 7.7%, between 3Q15 and 3Q16.

PM’s net revenue from the EEMA (Eastern Europe, the Middle East, and Africa) region and Latin America and Canada fell 4.0% and 11.7%, respectively, between 3Q15 and 3Q16. Its cigarette shipment volume in the EEMA region, Asia, and Latin America and Canada fell 5.4%, 9.0%, and 8.0%, respectively, and the cigarette shipment volume in the European Union rose 0.44%.

The company’s gross profit margin and operating margin fell 60 basis points and 30 basis points, respectively, between 3Q15 and 3Q16. Its net income fell to $1,938,000 in 3Q16 from $1,942,000 in 3Q15. It reported EPS of $1.25 in 3Q15 and 3Q16 and adjusted EPS excluding currency of $1.29 in 3Q16, a rise of 4.0% over 3Q15.

PM’s cash and cash equivalents rose 42.9% between 4Q15 and 3Q16. The company reported free cash flow excluding currency of $3.0 billion in 3Q16, a rise of 22.7% over 3Q15.

Projection

In 2016, Philip Morris (PM) has projected EPS in the range of $4.53–$4.58 at current exchange rates, not including share repurchases. 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.

Now, we’ll look at Spectrum Brands Holdings (SPB).

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