Philip Morris: Flawless Q1 and Raised 2024 Outlook; Still Cheap
Company Update (PM US) (Buy): Q1 results were strong in every respect, and the stock is still cheap with a 16x P/E and a 5.3% Dividend Yield
Highlights
Revenues and EPS grew by ~9% in dollars in Q1; ex-FX growth was double-digits.
IQOS, ZYN volumes grew strong double-digits; cigarettes volume fell just 0.4%.
IQOS showed its ability to grow despite flavor bans and local e-vapor competition.
2024 EPS growth is now expected to be 9-11% ex-FX and 3-5% in dollars.
At $97.66, we see a 77% total return (24.7% annualized) by 2026 year-end.
Introduction
Philip Morris (“PM”) released Q1 2024 yesterday (April 23); PM shares finished the day up 3.8% at $97.66.
We have maintained a Buy rating on PM since first publishing our research on the company online in June 2019. PM has been one of the top positions in our “Select 15” model portfolio as well as one of our largest positions in real life. Since our initiation in June 2019, PM shares have gained 56% (including dividends), despite currency headwinds and the disruption of its key Russia market, though the share price has been volatile in the past year:
PM Share Price (Last 1 Year)
Source: Google Finance (23-Apr-24).
We last published research on PM on February 12, when the share price had fallen to $89.12 following PM’s Q4 2023 results. We explicitly stated at the time that we disagreed with the market, and PM shares have gained 11% since.
(Our paid tier costs just $10, and PM shareholders would have made that from each share since our February article.)