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Philip Morris Stock Up ~30% this Year: More Upside?

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Stock performance

After losing 36.8% of its stock value in 2018, Philip Morris International (PM) began 2019 on a strong note. As of February 25, the company was trading at $86.60, which represents a rise of 29.7% year-to-date. Also, the company was trading at a premium of 33.9% to its 52-week low of $64.67 and a discount of 21.2% from its 52-week high of $109.9.

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Stock price drivers

Philip Morris’s stock price was driven by strong fourth-quarter results, investor optimism surrounding the company’s next generation of IQOS devices, and a strengthening broader equity market with the S&P 500 Index rising 11.5% year-to-date.

Philip Morris posted its fourth-quarter earnings on February 7. For the quarter, the company posted adjusted EPS of $1.25 on revenues of $7.50 billion, outperforming analysts’ EPS expectation of $1.16 and revenue estimate of $7.39 billion. The company’s revenue was driven by better-than-expected performance from its heated tobacco units. Also, during the earnings call, management expressed satisfaction with customers’ response to its next generation of IQOS devices, the IQOS 3 and IQOS MULTI, which were launched in mid-November globally.

Peer comparisons

Year-to-date, the stocks of Philip Morris’s peers Altria Group (MO) and British American Tobacco (BTI) have returned 5.0% and 18.7%, respectively. Also, the Consumer Staples Select Sector SPDR ETF (XLP), which invests 8.6% of its holdings in tobacco and cigarette companies, has increased by 6.6% year-to-date.

Series overview

In this series, we’ll look at analysts’ revenue and EPS expectations for 2019. We’ll also cover management’s guidance for 2019. First, we’ll look at Philip Morris’s valuation multiple and analysts’ recommendations.

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