Philip Morris: Q1 Weak as Guided, Stronger Growth & Margins in Rest of 2023

Company Update (PM US) (Buy)

Highlights

• PM shares fell 4.7% after Q1 results disappointed investors

• Weakness in Q1 was guided in advance and due to one-offs

• Underlying trends are strong; IQOS and ZYN again dominate

• PM shares have an 18x P/E and a 5.3% Dividend Yield

• We expect a total return of 51% (18% p.a.) by end of 2025. Buy

Introduction

We review our Buy rating on Philip Morris International Inc. (“PM”) after Q1 2023 results were released on Thursday (April 20). PM stock finished the day down 4.7%, which means the share price is down 8.0% in the past year:

PM Share Price (Last 1 Year)

Source: Google Finance (21-April-23).

We have followed Tobacco stocks for over a decade and began publishing our research on PM publicly with a Buy rating in 2019. Since then PM shares have returned 56% in 4 years, outperforming the S&P 500 by 10 ppt.

Investors have reacted negatively to Q1’s relatively weak growth and margin contraction. Both were guided by management in advance, and were the result of one-off factors or timing. Pricing p…