Philip Morris International is an approximately $157 billion dollar firm marketing cigarettes in almost 160 countries. The firm does not deal with the sale of cigarettes in the U.S., unlike another tobacco company, Altria. The tobacco company positions nearly 18.5x trailing earnings estimates, and almost 16x forward earnings estimates. The corporation’s income margin is 27 percent, and its operating margin is 43 percent.
Philip Morris International has a weak debt to equity ratio of over 300, and the firm has $20 billion in long-term debt, but management also has strong coverage of interest payments at 13x, and PMI has been capable to lately increase funds at less than 4 percent. The stock hit a 52 week high today.
The cigarette maker receives 40 percent of its earnings from the EU, 40 percent from Asia, about 8 percent from Eastern Europe, the Middle East and Africa, and almost 12 percent from Latin America and Canada. The corporation’s most effective growth over the previous several years has been in Japan, the Philippines, Turkey, and Russia. The firm’s profits in the EU have dropped considerably, with EU profits decreasing nearly 10 percent last quarter.
The tobacco company has grown over 50 percent in the previous year, even as Europe has experienced the crisis and the euro has decreased. PMI’s strong recent growth in Asia has more than offset EU weakness, but this past quarter, the firm noted unfavorable growth in Asia, and as well stated the probability of new considerable duty being charged by the Japanese and Philippines governments. PMI as well announced a considerable crisis in the EU, and insignificant profits in Latin America and Canada.
Philip Morris International persists to reiterate its currency neutral growth goal of 10-12 percent per year over the long-term, but this target is not reasonable. The cigarette maker is already acquiring back $6 billion in shares a year, and the present 10-12 percent growth rate it has had over the last year has only been possible because of the buy back, offering considerable shareholder value since the shares are up over 50 percent in the last year. The corporation’s present organic growth rate is nearer to 8 percent, and even this growth is unsustainable. PMI has been able to increase prices to offset market share failures in the EU, and the firm’s profits in continental Europe only dropped 2 percent over the last year.