On Wednesday, BofA Securities updated its stance on shares of Philip Morris International Inc. (NYSE:PM), increasing the price target to $139 from $125, while reiterating a Buy rating on the stock. The adjustment follows the company's CEO, Jacek Olczak, presenting at a consumer staples conference in Boston earlier this week.
During the event, Philip Morris confirmed its adjusted diluted earnings per share (EPS) forecast for 2024, projecting a range of $6.33 to $6.45, which translates to an increase of 5.3% to 7.3% from the previous year. This estimate includes a negative currency impact of $0.34 per share.
Excluding foreign exchange effects, Philip Morris anticipates an 11% to 13% year-over-year growth in EPS, aiming for a target of $6.67 to $6.79. Since its separation from Altria (NYSE:MO) in 2008, the company has seen enhancements in the quality of its revenue and profit growth. This improvement is attributed to volume growth, favorable shifts in product mix, and the ability to set pricing.
Philip Morris is expected to continue outperforming its peers and potentially exceed its own guidance despite potential challenges, such as the implementation of a flavor ban for heated tobacco products in Europe, the timing of regulatory approvals, and volume limitations for ZYN in the U.S.
The revised price objective of $139 represents a $14 increase and is based on a price-to-earnings (P/E) ratio of 19.3 times the estimated 2025 EPS of $7.18. The valuation reflects a 20-25% premium over the average P/E ratio of 15.7 times since July 2017, which is when the U.S. Food and Drug Administration (FDA) announced a new regulatory approach to nicotine.
Currently, Philip Morris trades at an 11% discount compared to the S&P 500 index, which is narrower than its historical average discount of 16% since July 2017 but wider than its 10-year average discount of 8%.
The upcoming years are expected to be periods of significant investment in the U.S. market for Philip Morris. However, the company is seen to be well-positioned for long-term success. BofA Securities highlights Philip Morris's attractive dividend yield and its strategic focus on transitioning smokers to higher-margin, less harmful products as key reasons for maintaining its Buy recommendation.
In other recent news, Philip Morris International has seen positive adjustments in its financial outlook. Stifel has increased the company's stock price target to $138 from $120, reiterating a Buy rating. This revision follows the company's confident presentation at a recent conference, where it reaffirmed its full-year guidance for 2024 and emphasized its growth driven by smoke-free products and resilient performance in combustible products.
Moreover, Philip Morris has committed to investing in smoke-free alternatives, which accounted for about 38% of the company's net revenues in the first half of 2024.
The company has also made a significant $232 million investment into its Owensboro, Kentucky manufacturing facility to increase production capacity for ZYN nicotine pouches, expected to generate 450 direct new jobs and approximately $277 million in annual regional economic impact.
In terms of analyst notes, Goldman Sachs (NYSE:GS) has added Philip Morris International to its US Conviction List, indicating confidence in the company's potential market performance. Deutsche Bank (ETR:DBKGn) and BofA Securities have also maintained a Buy rating on the company's shares.
Despite facing industry challenges, Philip Morris maintains its 2024 earnings forecast, expecting an 11% to 13% increase in adjusted diluted earnings per share. Lastly, the company continues to focus on sustainability and cost savings amid these recent developments.
InvestingPro Insights
Philip Morris International Inc. (NYSE:PM) has demonstrated a robust financial performance, with a notable market capitalization of $197.27 billion, underscoring its significant presence in the industry. Investors may find the company's gross profit margin particularly impressive, standing at 63.87% for the last twelve months as of Q2 2024. This figure not only reflects the company's efficient operations but also aligns with the improvements in revenue and profit growth mentioned in the article. Moreover, the company's commitment to shareholder returns is evident through its dividend yield of 4.14% and the fact that it has raised its dividend for 16 consecutive years, which may appeal to income-focused investors.
With a P/E ratio of 22.47, Philip Morris is trading at a premium, which could be justified by its strong market position and consistent performance. The InvestingPro Tips also highlight that the stock is currently trading near its 52-week high, with a price percentage of 99.82% of that high, indicating a strong recent performance. For readers interested in a deeper dive into the company's metrics and future outlook, InvestingPro offers additional tips. On the platform, investors can explore more than 10 InvestingPro Tips that provide further insights into Philip Morris's financial health and stock performance, potentially guiding investment decisions.
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