Philip Morris International and Reynolds American Offer Great Value

Source from:  Tobacco World  08/08/2013

Philip Morris International had a tough second quarter, mainly due to adverse currency fluctuations. Gross income after excise taxes, came in at $ 7.917.000.000, missing $ 8.17 billion consensus by a wide margin. But almost 30% of the world market with the exception of the United States and China, and a significant presence in emerging economies, where there are population growth smokers; the owner of Marlboro may be facing a bad impulse.

Explaining the poor quarter

Let's start with the bad news. Philip Morris International, Inc (NYSE: PM) was once again lowered its profit forecast by 3%. As you can see the stock performance over the past month, the market did not take this lightly. The good news is that most of the reasons why Philip Morris had to give a pessimistic forecast exogenous macroeconomic factors: the strengthening of the U.S. dollar, the recession in Europe and an increase in taxes in the Philippines and Russia all had a negative impact on sales volume.

Will it be better?

You bet it will. Although the share of Americans, who smoke has been in sharp decline (currently only 20% of Americans smoke) due to increased health awareness and cancer, is the case in countries with developing economies, where in some cases, the population of smokers is increasing. In these countries, the proportion of smokers consumption of Philip Morris products (Marlboro) is still low, but their average income increases, I expect that the transition to Philip Morris International, Inc (NYSE: PM) products, and iconic brands like Marlboro remains quite strong and increase social status.

The main market is Asia, where the PMI cigarette volume grew by 1.7%. In Indonesia industry volume increased by 3.7% in the second quarter, while Philip Morris volume increased by 6.0%. As for Japan, the total cigarette industry decreased by 4% in the final quarter, and the amount of PMI is under pressure. However, I believe that a strong pipeline of innovative products will protect the market share achieved so far.

Finally, despite the rise in unemployment is detrimental to the budget of the European smokers, Philip Morris International, Inc (NYSE: PM) is managing to grow, as evidenced by 0,7% increase in the PMI (the share of the cigarette market), the 0.6% increase in Marlboro sales and 1.5%.increase in fine cut tobacco sales. Enditem