Philip Morris: Q1 Rebased Earnings Lower But Kept Same Growth Targets

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

Summary

• PM's Q1 2022 results last Thursday show that structural growth has continued, albeit on a smaller base after Russia and Ukraine are excluded.

• Losing Russia and Ukraine reduced 2021 EPS by 10%; including currency, adjusted EPS is expected to be 11% lower year-on-year in 2022.

• Excluding Russia, Ukraine and currency, PM has the same growth expectations as before, including EPS growth of at least 9%.

• Q1 2022 showed broad-based growth across most regions and further momentum in PM's Reduced Risk Products, especially IQOS.

• With shares at $102.53, we expect a total return of 35% (9.3% annualized) by 2025 year-end. The Dividend Yield is 4.9%. Buy.

Introduction

We review our Philip Morris investment case after Q1 2022 results last Thursday (April 21).

We initiated our Buy rating on PM in June 2019. Since then, shares have gained 49% (including dividends), including 33% since the end of 2020.

Q1 results support our view that:

• The planned exit from Russia will materially rebase earnings lower

• Curre…