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.
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.
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.
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.