Philip Morris: Picking Up Speed in Q3; Still Cheap at 20x P/E
Company Update (PM US) (Buy): Multi-year compounding will likely continue even after a 54% gain in the past year.
Highlights
Revenues, EBIT and EPS all grew by double-digits organically in Q3.
IQOS growth returned to double-digits in Europe as flavors bans are lapped.
ZYN returned to market share gain in the U.S. and grew volume by 41.4%.
Total volume will grow for a 4th year, and EPS will grow ~8% even in dollars.
At $129.86, we see a 56% total return (16.0% annualized) by 2027 year-end.
Introduction
Philip Morris (“PM”) released Q3 2024 results on Tuesday (October 22); PM shares rose 10.5% that day and, as of Friday, have gained 54% in the past year (including dividends), 8 ppt ahead of the NASDAQ Composite:
PM Share Price (Last 1 Year)
Source: Google Finance (27-Oct-24).
PM is currently the largest position in our “Select 15” model portfolio, having been part of the portfolio since inception at the start of 2023 and a top-5 position since September 2023. We have maintained a Buy rating on PM since first publishing our research on the company online in June 2019, and our total gain in this period now exceeds 100%.
Q3 2024 results show PM’s structural growth continuing, and we expect strong returns to continue for years to come.
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