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Why Bank of America Upgraded Philip Morris

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The upgrade

Today, Bank of America upgraded Philip Morris International (PM) from “underperform” to “neutral” and also raised its price target from $81 to $94. As reported by CNBC, Bank of America is confident of Philip Morris’s margins expanding this year in accordance with the guidance provided by PM’s management. Going forward, Bank of America expects PM’s margin to improve further with the easing of the commercialization of RRPs (reduced risk products). Bank of America has raised its EPS estimates for 2019, 2020, and 2021 to $5.19, $5.66, and $6.23, respectively, from earlier estimates of $5.12, $5.52, and $6.03, respectively.

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However, today, Jefferies cut its 12-month price target from $84 to $82. Among the total 19 analysts that follow Philip Morris, 57.9% have given it a “buy” rating, while 31.6% are recommending “holds,” and 10.5% are in favor of a “sell” rating. On average, analysts have set a 12-month price target of $93.13 for PM, which represents an upside potential of 8.9% from its stock price of $85.51 as of May 16.

Peer comparisons

Of the 17 analysts following Altria Group (MO), 47.1% are in favor of a “buy” rating, while 35.3% have given it “holds” and 17.6% have given “sell” recommendations. On average, analysts have given Altria a 12-month price target of $58.73, which represents an upside potential of 12.9% from its stock price of $52.03.

Analysts’ recommendations

For 2019, analysts are expecting Philip Morris to post revenue of $29.72 billion, which represents an increase of 0.3% from $29.63 billion in 2018. During the same period, the company’s adjusted EPS are expected to rise by 0.8% to $5.14.

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