Philip Morris: Cutting Forecasts After Plans To Exit Russia; Reiterate Buy

(Preview) Company Update (PM US) (Buy)

Summary

• PM announced on Thursday that it plans to exit Russia; this was likely priced in, as shares already fell 14.7% since Russia invaded Ukraine.

• We estimate Russia and Ukraine to be worth 7% of the EPS and 1-2% of each year's EPS growth. Currency headwind has worsened.

• We now expect Adjusted EPS to fall 9.5-12.5% in 2022 (before buybacks), implying a 17.1x P/E. The Dividend Yield is 5.4%.

• The dividend is well-covered and should continue to grow. We also expect buybacks to continue, though they may be paused during 2022.

• With shares at $92.58, on reduced forecasts, we expect a total return of 49% (12.4% annualized) by 2025 year-end. Buy.

Introduction

We are reducing our forecasts on Philip Morris International Inc. after the company announced plans to exit Russia yesterday (Thursday March 24).

This was likely already priced in. Philip Morris stock closed up 1.5% for the day, though still down 14.7% since Russia invaded Ukraine on February 24.

PM shares have gained 34.6% (including dividends…