On Wednesday, Deutsche Bank (ETR:DBKGn) maintained a Buy rating on shares of Philip Morris International Inc. (NYSE:PM) and increased its price target from $116.00 to $118.00. The adjustment follows the company's second-quarter performance, which showed a 2.8% rise in shipment volumes. This growth contributed to a 5.6% increase in group net revenues, reaching $9,468 million. The organic increase was even higher at 9.6%.
Philip Morris reported a gross profit of $6,139 million, a 6.7% increase, which translates to a gross margin of 64.7%, improving by 70 basis points. This improvement was supported by higher gross margins from both the company's smoke-free products, which saw a 15% margin increase to approximately 67%, and combustibles, which increased by 1.8% to 64.4%.
The company's adjusted operating income rose by 12.5% to $3,656 million, although reported margins decreased slightly by 80 basis points to 38.6%.
Despite these strong financials, the company's adjusted earnings per share (EPS) saw a marginal decline of 0.6% to $1.59. Still, excluding currency impacts, the adjusted EPS actually increased by 10.6%.
Looking forward, management has indicated an expectation for accelerated growth in the smoke-free product segment in the second half of 2024. This outlook has led to an upgraded adjusted EPS guidance and consequently, a circa 1% increase in Deutsche Bank's adjusted EPS forecasts for Philip Morris.
The valuation of Philip Morris remains appealing to Deutsche Bank, with the stock trading at 15.4 times price-to-earnings (PE) and 13.0 times enterprise value-to-earnings (EV) for the calendar year 2025. The bank's reiterated Buy rating and the modest increase in the price target reflect confidence in the company's financial health and future prospects.
In other recent news, Philip Morris International Inc. (PMI) announced robust growth for the second quarter of 2024, bolstered by strong performance in its smoke-free and combustible portfolios. The company's smoke-free products, including IQOS and ZYN, have shown substantial momentum in markets such as Japan, Europe, and the U.S. In light of these developments, PMI has revised its full-year growth forecast upward for 2024.
PMI reported record growth in organic revenue and operating income and witnessed the expansion of its IQOS user base to 30.8 million. The company is also making strides in the U.S. with its ZYN product, despite supply constraints. Still, regulatory delays in Taiwan have necessitated a revision of sales objectives for this market.
The company is optimistic about continued growth outside of Europe and acceleration in Europe following flavor ban adjustments. PMI aims to achieve around $15 billion in smoke-free net revenue for the year. Despite some challenges, such as a slight decline in market share and supply chain constraints, the company remains focused on its goal of expanding its smoke-free business globally.
InvestingPro Insights
Philip Morris International Inc. (NYSE:PM) continues to demonstrate financial resilience and growth potential, as reflected in recent data and analysis from InvestingPro. With a notable market capitalization of $171.89 billion, the company's solid fundamentals are evident.
The gross profit for the last twelve months as of Q1 2024 stood at an impressive $22.89 billion, with a gross profit margin of 63.69%, underscoring the company's efficiency and profitability. Furthermore, the stock's dividend yield as of June 2024 is attractive at 4.75%, complemented by a consistent track record of dividend growth, now in its 17th consecutive year.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, reflecting optimism about Philip Morris's performance. Moreover, the company's stock is praised for its low price volatility, suggesting a stable investment choice for shareholders.
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