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Philip Morris Downgraded to ‘Neutral’

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Price movement

Philip Morris International (PM) has a market cap of $140.6 billion. It fell 0.89% to close at $90.42 per share on January 4, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.0%, 3.8%, and -1.2%, respectively, on the same day.

PM is trading 0.34% above its 20-day moving average, 0.46% below its 50-day moving average, and 5.3% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Value (IWX) invests 2.0% of its holdings in Philip Morris. The YTD price movement of IWX was 1.5% on January 4, 2017.

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

  • Altria Group (MO): $132.8 billion
  • Reynolds American (RAI): $79.1 billion
  • Vector Group (VGR): $2.9 billion

Philip Morris’s rating

On January 4, 2017, Bank of America Merrill Lynch downgraded Philip Morris International’s rating to “neutral” from “buy.” It also reduced the stock’s price target to $96 from $102 per share.

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Philip Morris’s performance in 3Q16

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

Philip Morris’s net revenues 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. The company’s cigarette shipment volume in those regions fell 5.4%, 9.0%, and 8.0%, respectively. Its 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 billion in 3Q16 from $1.942 billion in 3Q15. It reported EPS (earnings per share) 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.

EPS projections

For 2016, Philip Morris (PM) has projected EPS of $4.53–$4.58 at current exchange rates, not including share repurchases. The 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 Altria Group (MO).

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