Philip Morris: Strong Q2 Results, 2021 Outlook Raised Again (Preview)

Company Update (PM US) (Buy)

Summary

• Q2 2021 results showed Philip Morris continued to have a broadly stable cigarette business and strong momentum in Heated Tobacco.

• IQOS Heated Tobacco has reached a 7.3% share globally (ex. the U.S.) and has continued to show strong volume growth in most key markets.

• Adjusted EBIT and Adjusted EPS both grew by approx. 20% year-on-year in H1. The 2021 organic EPS growth outlook has been raised to 12-14%.

• The stock is attractively valued with a P/E of 16.3x (on 2021 expected EPS) and a Dividend Yield of 4.9%.

• With shares at $97.93, we expect an exit price of $123 and a total return of 44% (12.0% annualized) by 2024 year-end. Buy.

Introduction

Philip Morris released its Q2 2021 results this morning, showing strong momentum in its business and raising its 2021 full-year outlook again.

We have had a Buy rating on Philip Morris International stock since June 2019, and it has been our top pick in the Tobacco sector, alongside our Buy ratings for Swedish Match, Altria and British American Toba…