Philip Morris to Yield 4%

Morningstar equity analysts rate Philip Morris as one of the strongest consumer stocks. The fairly valued has a wide economic moat, in in excellent financial health and pays a dividend

Philip Gorham 21 October, 2014 | 3:27PM
Facebook Twitter LinkedIn

Philip Morris International (PM) is one of the strongest businesses in our consumer defensive coverage. The company generates industry-leading normalised operating margins in the low- to mid-40% range and boasts a wide economic moat with strong brand loyalty and cost advantages at its core. Nevertheless, we see room for execution improvement and we think margins could go even higher.

Philip Morris' profitability in emerging markets is a key differentiator against its competitors, and it has a strong presence in Asia. The advantage of selling in emerging markets is that volumes are more stable, and in some cases, increasing. Indonesia where Philip Morris has about a 31% share, Turkey where it is 45%, and the Philippines with a 90% share are all growing in volume at a low- to mid-single-digit rate as a more lax regulatory environment in those regions has led to higher levels of smoking initiation. This should help to slow the firm's decline in volumes over the next decade. The disadvantage of emerging markets is that on the whole, they are less profitable than developed markets.

This is less true for Philip Morris International than it is for its competitors. It generated a 2013 earnings before tax (EBIT) margin of 43% in Asia, only modestly below the 44% group EBIT margin and 300 basis points above that of British American. The Asia segment margin is skewed by the firm's strong presence in the profitable Japanese market, but it also reflects Philip Morris' positioning in premium categories.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Philip Morris International Inc101.86 USD-0.94Rating

About Author

Philip Gorham  

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement