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Tobacco Producer Philip Morris Is Here to Stay Source from: Nasdaq 12/28/2015  Tobacco companies have long been known for their legacy of offering rich dividends. Philip Morris International (PM) is one such company. It is the leading international tobacco company, with six of the world's top 15 international brands, including Marlboro, the number one cigarette brand worldwide. Philip Morris' products are sold in more than 200 markets. In 2014, the company held an estimated 15.6% share of the total international cigarette market outside of the U.S., or 28.6% excluding China and the U.S.
It has the industry's strongest and most diverse brand portfolio, led by Marlboro and L&M, the third most popular brand. Marlboro's volume outside the U.S. was 291.1 billion cigarettes, which makes it bigger than the next two largest brands combined. Since 2009, Philip Morris International and Swedish Match AB have operated a joint venture company that has commercialized smokeless tobacco products, outside of Scandinavia and the U.S. Through this joint venture company, Philip Morris sells smokeless tobacco products, including Swedish snus. The company's brand portfolio includes a variety of blends and styles across 150 distinct brands and more than 1,900 variants. The company reported a strong third quarter. In spite of hailing from a challenging industry, Philip Morris is making aggressive efforts to gain a solid position. The company is already gaining momentum in key market regions. Philip Morris is one of the very few companies that provide high dividends at great price. Strong third quarter Reported diluted EPS of $1.25, which declined by 13 cents or 9.4% year over year. Adjusted diluted EPS of $1.24, which decreased by 15 cents or 10.8% year over year. Cigarette shipment volume of 218.9 billion units, decreased by 1.5% excluding acquisitions. Reported net revenues, excluding excise taxes, of $6.9 billion, decreased by 11.8% year over year. Excluding unfavourable currency of $1.4 billion, reported net revenues, excluding excise taxes, increased by 5.9%. Dividends During the quarter, Philip Morris increased its regular quarterly dividend by 2% from $1.00 to $1.02, representing an annualized rate of $4.08 per common share. Since its spin-off in March 2008, Philip Morris has increased its regular quarterly dividend by 121.7% from the initial annualized rate of $1.84 per common share. Share repurchases Philip Morris did not make any share repurchases in the first nine months of 2015. 2015 full-year expectations The company expects the following: EPS to be in the range of $4.35 to $4.40. On an adjusted basis, diluted EPS are projected to increase in the range of 11% to 12%. Factors that contributed to the third quarter success Strong business momentum. Organic volume trends. Market share growth. Robust pricing. Strong business fundamentals. Organic volume, market share and pricing trends remain very robust against the backdrop of an improved macroeconomic environment. Future prospects The company has good potential in the near future since it has created a niche for itself in the e-cigarette industry. Philip Morris is taking continual steps to improve its market position. It is concentrating on building up a solid international presence. Regular price hikes are going to add to its earnings in the future. In 2015, the company has decided to enhance production processes and make improvements in the supply chain management. It is also initiating in cost curtailment efforts On a concluding note Philip Morris is a dividend aristocrat. Despite hailing from an unhealthy industry, this company has a huge customer base. This company is known for becoming investors' staple. It competes with premium brands and boasts of higher margins than most of them. Many have thought that the cigarette industry is a sunset industry because of the social stigma attached to it. But there is a silver lining to it since an increasing number of people are moving towards ecigarettes. Out of the global $169 billion tobacco industry, about $6 billion comes from ecigs. The U.S. is the largest ecig market worth $1.7 billion as of 2014. This company has plenty of room for growth and to offer to its shareholders. Philip Morris is a strong company, but since the tobacco industry is currently facing a lot of headwinds, this company has to overcome a lot of obstacles. But there is good news. Since the company is focusing on international markets, it does not have to comply with a lot of restrictions because the U.S. is mostly posing these regulations to the tobacco companies. The company reinforced a great start with solid third quarter results. While currency headwinds remain stubbornly high, the company is ever focused on the prudent management of cash flow. It is committed to returning around 100% of free cash flow to shareholders. Enditem Related Updates |
