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Has Philip Morris Stock Bottomed Out?

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Stock performance

As of yesterday, Philip Morris International (PM) was trading at $77.38, which represents a fall of 9.5% since its first-quarter earnings on April 18. The company is also trading at a discount of 16.6% from its 52-week high of $92.74 and a premium of 19.7% from its 52-week low of $64.67.

In the first quarter, Philip Morris reported adjusted EPS of $1.09, outperforming analysts’ EPS estimate of $1.0 by 9.0%, while its revenue came in at $6.75 billion—above analysts’ expectation of $6.74 billion.

After reporting its first-quarter earnings, Philip Morris’s management lowered the 2019 adjusted EPS guidance to $5.09 due to the greater impact from the consolidation of its subsidiary in Canada.

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On May 28, CNBC reported that data collected by Nielsen revealed a fall of 6.9% in cigarette sales by value in the US during the four weeks that ended on May 18. The fall was steeper in cigarette sales by volume with a drop of 11.2%. The announcement led to a fall in tobacco stocks, and the weakness in the tobacco sector caused Philip Morris stock to fall.

Year-to-date performance

Despite the fall in its stock price since the announcement of its first-quarter earnings, Philip Morris has returned 15.9% year-to-date. The strong fourth-quarter earnings, investors’ expectations from the next generation of IQOS devices and the strengthening of the broader equity market appear to have driven the company’s stock price to rise.

Also, on April 30, the FDA authorized the marketing of Philip Morris’s IQOS in US markets, which has also contributed to an increase in the company’s stock price.

During the same period, the S&P 500 Index has increased 16.2% while peers Altria Group (MO) and British American Tobacco (BTI) have returned -1.2% and 12.3%, respectively.

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