Philip Morris: Nothing Can Stop This Industry Leader

Source from:  Tobacco World 08/01/2012

We were pleased to receive a positive response on our previous reports of Philip Morris International. We had a long position in Philip Morris International from March 31, 1999, when was part of the Philip Morris Company, and we were pleased with the results of the company and its spin-offs at this time. We believe that Philip Morris International is an excellent investment because it is one of those rare breed of companies that offer above-average dividend yield of 3.5% and is a champion of the growth in dividends. We decided to reconsider its recent Q2 2012 earnings report. PM before the challenging macroeconomic headwinds, as well as complex compared to the year-ago quarter due to a one-time increase in the Asian supply due to tobacco in Japan (JAPAF.PK) struggles as a result of the Japanese earthquake. Despite this, the company faced him down as an industry leader that is actually reported EPS growth for the quarter compared to the same period last year. EPS grew by 0.7%, primarily due to share repurchases. I saw a negative EPS headwind of 7.4% due to the strong U.S. dollar compared with the rapid rates of global subsidiaries. EPS growth in 2012 also affected the one-time increase in Asian sales last year as a result of the Japanese earthquake / tsunami. PM would have increased its share by 16.8% excluding these two items. In considering the issue of a quarterly profit for 2nd quarter 2012, we noticed that the prime minister made a note of this temporary increase in market share. PM repurchased 17.8M shares of its common stock during the quarter by $ 1.5 billion at the current repurchase program. As the PM has completed 95% of the repurchase program, he announced a new three-year share repurchase in the amount of $ 18B from August 1, 2012. We expect that the company will continue the tradition of increasing the dividend in September, when the Council intends to declare dividends. In addition to beating consensus estimates of $ 0.02, it reaffirmed its 2012 EPS range $ 5.10-$ 5.20. Philip Morris saw strong growth in Eastern Europe, Middle East and Africa segment. The company increased its revenue by 6.9% in the fourth quarter compared to the same period the previous year and 13.2% excluding the effect of the sharp strengthening of the U.S. dollar. This market reached 5.1% per unit volume growth, thereby creating a 13.5% increase in operating income (23.1% excluding negative currency effects). The market saw its operating profit increased by $ 114 million due to the positive initiatives and prices $ 104M due to changes in volume and product mix. It was the fifth consecutive quarter of positive volume growth and product mix in the region. Chesterfield was the only one of its top 10 brands to see a decline in unit volume during the quarter. Marlboro increased by one billion units (5%) during the period of strong growth in North Africa, Saudi Arabia and Serbia. Parliament rose by 1.1 billion pieces (16.3%) in Eastern Europe and Turkey. Russia saw a 8.7% increase for the quarter and 5% in the first half. Russian PM’s market share rose by 70 basis points to 26.1% at the end of May by the Parliament, L & M, Bond Street and Next. Philip Morris Asia reported good results for the quarter, except for the effects 6300000000 unit increase in the 2nd quarter of 2011 after the Japanese earthquake as a result of disruptions in the supply chain of Japan Tobacco. On a reported basis, organic cigarette volumes declined by 0.7% and increased by 7.4% excluding temporary increase in unit volume in 2011. Philip Morris has expanded in Indonesia, when it acquired PT HM Sampoerna Tbk. Indonesian tobacco market volume grew by 6.9% and the PM / Sampoerna increased volumes by 17.8%. This has allowed Philip Morris, to increase its market share by 3.1% in the fourth quarter and now stands at 33.5%. Management believes that this growing market of its volume by 8% and further growth of the company’s market share. Even if the company saw its operating income and revenue decline of 2.4% and 2.8% in comparison with the previous quarter, Philip Morris Asia continues to produce strong earnings ($ 2.855B), operating profit ($ 1.36B), and Operating Margin (47.78%). Philip Morris and South America reported mixed performance. This is the smallest segment of the Prime Minister and saw flat revenue growth for the quarter and year from the date of the same currency headwind that all markets are facing. This contributed to the decline in operating income by 7.1% for the quarter and 6.4% year-to-date. PM Union Europe segment was the weakest performing market because of the deep recession in the euro zone. In conclusion, we are happy with the performance of Philip Morris International. We believe that for those who are interested in investing in tobacco company, Philip Morris, just indestructible. Based on our observations, we believe that he did not decline, the currency headwind, no large temporary increases in the share market can keep Philip Morris appointed rounds increases EPS. Even with the $ 0.27 per share, EPS headwind to growth due to the adverse effects of the strong U.S. dollar, the company will register 5-6% EPS growth this year. Add to dividends, which, of course, will be increased in September, and you have one of the best companies in the world to invest in. Given that the company increased its capital expenditures over the same period last year, we believe that there is great potential for organic growth than it seems at first glance at this company. Philip Morris has always been a strong performing company, whether it is currently in an independent or when it was part of the Philip Morris Company, along with Altria and Kraft. The last thing we love about Philip Morris that it is one of the few companies that include his record with his 8-K earnings release. Enditem