Philip Morris: Remarkably Strong Q2 Excluding Currency & Russia

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

Summary

• PM Q2 results were hit by the strong dollar and the loss of earnings from Russia and Ukraine, but were remarkably strong otherwise.

• Pro forma, volume grew 3.0% year-on-year in Q2 despite supply chain constraints, and revenues grew 7.2% excluding currency.

• There was good progress across Reduced Risk Products, and 2022 currency-neutral EPS growth outlook was raised to 10-12%.

• PM shares are at 17.7x 2022 EPS and a Dividend Yield of 5.3%. Management's commitment to the dividend is "unwavering"

• With PM at $93.59, we expect a standalone total return of 44% (12.2% annualized), more if the Swedish Match deal closes. Buy.

Introduction

Philip Morris International Inc. stock rose 4.2% on Thursday (July 21) after Q2 2022 results were released.

We initiated our Buy rating on PM in June 2019. Since then, shares have gained 39% (including dividends), though the share price has fallen 17% from its peak in mid-February, just before Russia invaded Ukraine.

Q2 2022 results reflect the exceptional one-of…