Philip Morris: All Growth Drivers On Track In Q1 2021

Company Update (PM US) (Buy)

Summary

• PM’s growth drivers remained on track in Q1, driving what we expect to be a low-teens annualized return, including a 5.1% Dividend Yield.

• Cigarette volumes were broadly stable, though reported declines were higher due to elevated shipments at the start of COVID last year.

• Margin expansion continued, powered by a combination of IQOS growth, pricing, cost savings, operational leverage, and currency.

• IQOS continued to grow in the E.U., Russia, and Japan; it now has 10%+ share in 12 markets, and is still the category leader.

• With PM shares at $94, we expect an exit price of $123 and a total return of 52% (13.0% annualized) by 2024. Buy.

Introduction

Philip Morris released good Q1 2021 results yesterday (April 20). Shares closed up 2.4%, near their highest level since April 2018.

We initiated a Buy rating on Philip Morris shares in June 2019, and have reiterated it multiple times. So far PM shares have gained 31.7% (including dividends) in just under 2 years, and we believe they continue t…