Philip Morris: Double-Digit Upside Still Possible - Thanks To Robust Tobacco Monetization

seekingalpha07-27

PM continues to demonstrate why it is the best of breed tobacco stock, thanks to its growing combustible sales volume and the Smoke-Free approaches already accretive to its top/ bottom-lines.Our ...

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Thanks To Robust Tobacco Monetization\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-27 00:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4706020-philip-morris-double-digit-upside-still-possible-thanks-to-robust-tobacco-monetization><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>PM continues to demonstrate why it is the best of breed tobacco stock, thanks to its growing combustible sales volume and the Smoke-Free approaches already accretive to its top/ bottom-lines.Our ...</p>\n\n<a href=\"https://seekingalpha.com/article/4706020-philip-morris-double-digit-upside-still-possible-thanks-to-robust-tobacco-monetization\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1121112475.USD","symbol_name":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (USDHDG) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4706020-philip-morris-double-digit-upside-still-possible-thanks-to-robust-tobacco-monetization","article_id":"2454032097","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/163853932/image_163853932.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2454032097","pubTimestamp":1722009600,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"PM continues to demonstrate why it is the best of breed tobacco stock, thanks to its growing combustible sales volume and the Smoke-Free approaches already accretive to its top/ bottom-lines.Our previ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU1121112475.USD":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (USDHDG) ACC","LU1506573853.SGD":"MANULIFE GF GLOBAL EQUITY \"AA\" (SGD) INC","NYSE":"纽交所","BK4588":"碎股","GB00B4QBRK32.GBP":"FUNDSMITH EQUITY \"R\" (GBP) INC","BTI":"英美烟草","LU1043141396.HKD":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (HKD) ACC","GB00B4LPDJ14.GBP":"FUNDSMITH EQUITY \"R\" (GBP) ACC","SG9999011175.SGD":"Nikko AM Global Dividend Equity Dis SGD-H","LU1043141123.HKD":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (HKD) INC 2","LU0661504455.SGD":"Blackrock Global Equity Income A5 SGD-H","PM":"菲利普莫里斯","LU0426412945.USD":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (USD) ACC","LU0426417589.USD":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (USD) INC","LU1228905037.USD":"NINETY ONE GSF GLOBAL QUALITY DIVIDEND GROWTH \"A\" (USD) ACC","MO":"奥驰亚","LU0994945656.USD":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (USD) INC 2","LU2404859741.USD":"FUNDSMITH EQUITY FUND \"R\" (USD) INC","LU0949170772.SGD":"Blackrock Global Equity Income A6 SGD-H","LU2404859667.USD":"FUNDSMITH EQUITY FUND \"R\" (USD) ACC","LU1228905540.USD":"NINETY ONE GSF GLOBAL QUALITY DIVIDEND GROWTH \"A\" (USD) INC 2","IMBBY":"帝国烟草","LU0690374961.EUR":"FUNDSMITH EQUITY \"R\" (EUR) INC","LU0314106906.USD":"MANULIFE GF GLOBAL EQUITY \"AA\" (USD) INC","LU0738911758.USD":"Blackrock Global Equity Income A6 USD","LU0690374615.EUR":"FUNDSMITH EQUITY \"R\" (EUR) ACC","SG9999001440.SGD":"United Global Dividend Equity Fund A SGD Dist","BK4585":"ETF&股票定投概念","BK4075":"烟草","BK4566":"资本集团","LU0545562505.USD":"NINETY ONE GSF GLOBAL QUALITY DIVIDEND GROWTH \"A\" (USD) INC","SG9999003800.SGD":"Nikko AM Global Dividend Equity Acc SGD-H"},"translate_title":"菲利普莫里斯：两位数的上涨仍有可能——得益于强劲的烟草货币化","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BTI":1,"PM":1,"NYSE":1,"IMBBY":1,"MO":1},"content_text":"PM continues to demonstrate why it is the best of breed tobacco stock, thanks to its growing combustible sales volume and the Smoke-Free approaches already accretive to its top/ bottom-lines.Our previous ZYN thesis has also played out as expected, attributed to the double digit YoY growth in its nicotine pouch sale volume globally in FQ2'24.With the management already guiding higher US nicotine pouch sales volume and capex in 2024, ZYN may remain a growth driver moving forward, thanks to the Swedish Match acquisition.Based on the robust FQ2'24 adj EPS growth and raised FY2024 guidance in 2024, we believe that the consensus forward estimates appear to be rather conservative now.With more upgrades in the horizon and PM's dividend yields still rich, it continues to offer a compelling growth/ dividend investment thesis for opportunistic investors.   Inok/iStock via Getty ImagesWe previously covered Philip Morris (NYSE:NYSE:PM) in May 2024, discussing why it remained a Buy for investors looking to buy the best of breed tobacco stock, with the Smoke-Free approaches already accretive to its top/ bottom-lines and long-term growth opportunities. Combined with the robust capital appreciation and dividend income prospects, with Seeking Alpha Quant still rating its dividend safety at B+, we believed that the stock's premium valuations over its peers and sector medians had been well warranted indeed. Since then, PM has charted an excellent total return of +9.2%, well outperforming the wider market at +6.7%. Even so, we are reiterating our Buy rating, thanks to the top/ bottom line beats in the FQ2'24 earnings call and the raised FY2024 guidance. Combined with the growing cigarette volumes and expanding HTUs market share, it is apparent that the leading tobacco stock continues to execute brilliantly, with consumer demand remaining robust. We shall discuss further. PM's Tobacco Investment Thesis Remains Promising, Thanks To Its Robust Performance Metrics   PM YTD Stock Prices Trading ViewPM, along with other tobacco stocks, has charted impressive YTD returns indeed, despite the secular decline observed in tobacco use globally. The same downtrend has also been reported by numerous tobacco companies and the World Health Organization [WHO], with it apparent that more consumers are preferring vaping/ e-cigarette options and/ or cannabis. PM's Robust FQ2'24 Performance PMThis is where PM has had a great head start compared to its peers, attributed to its robust smoke-free business segment, with it already generating net revenues of $3.6B (+18.3% YoY) while comprising 38.1% of its overall sales in FQ2'24 (+2.7 points YoY).   Most importantly, the segment continues to report richer gross margins of approximately 63.8% (+2 points YoY), implying that its smoke-free offerings are already accretive to its bottom-lines, while nearing the combustible segment's gross margins of approximately 64.4% (+0.4 points YoY) in the latest quarter. Combined with the growing shipment volumes (aside from SNUs) and favorable pricing across most of its segments, it is unsurprising that PM has reported a double beat FQ2'24 earnings call. This is with robust net revenues organic growth of +9.6% YoY and adj operating incomes growth of +12.5% YoY, with the supposed miss only attributed to non-material FX issues. At the same time, our previous ZYN thesis has also played out as expected, attributed to the +50.6% YoY growth of PM's nicotine pouch sale volume globally in FQ2'24, with the management already guiding higher FY2024 US sales volume of up to 580M cans (up by +11.5% from the previous guidance of 520M offered in the FQ4'23 earnings call). This development has also led to the higher FY2024 capex guidance of $1.35B in the midpoint (+2.2% YoY), up from the previous number of $1.2B (-9% YoY), attributed to the expanding ZYN manufacturing capacity in the US. With these investments likely to contribute incremental sales growth from 2025 onwards, we believe that we may see PM continue to execute brilliantly in the smoke-free market, while demonstrating the management's brilliant acumen in acquiring Swedish Match for $16B in 2022. At the same time, the tobacco company's IQOS line remains a market leader globally with 30.8M users as of FQ2'24 (+3.6M YoY), while growing market share in key markets, such as Japan, Greece, and Italy. This development further underscore why the upcoming launch of IQOS 3 in Austin, Texas is likely to be rather successful, with the management's ambition of 10% in US tobacco/ HTU share by 2030 unlikely to be overly aggressive.  This is especially since the alternative tobacco market in the US is expected to grow from $23.49B in 2022 to $32.05B in 2027, expanding at a CAGR of +6.4%, providing PM with a new market growth opportunity. The Consensus Forward Estimates Seeking AlphaAs a result, we believe that the consensus forward estimates for PM remain on the conservative side, based on the projected top/ bottom-line growth at a CAGR of +6.4%/ +8.4% through FY2026, respectively. This is because the tobacco company has reported a robust FQ2'24 adj EPS growth by +10.6% YoY (constant currency), while recently raising the FY2024 adj EPS guidance to $6.73 (+11.9% YoY, constant currency), up from the previous guidance of $6.49 (+7.9% YoY, constant currency). Assuming that the PM management is able to consistently deliver improved bottom-line growth at a blended CAGR of +10%, we believe that the consensus may potentially raise their FY2026 adj EPS estimates to $8.00 instead, up from the current estimates of $7.65. This development is important indeed, since it is critical to our long-term price target calculation in the next segment. PM Valuations Seeking AlphaAt the same time, this also means that PM remains reasonably valued at FWD P/E valuations of 16.94x, or 13.4x, based on our estimated FY2026 adj EPS of $8.00. Even when compared to its peers, such as British American Tobacco (BTI) at 7.19x with the projected adj EPS growth at a CAGR of +2.6% through FY2026, Altria (MO) at 9.69x/ +3.7%, and Imperial Brands (OTCQX:IMBBY) at 8.17x/ +7.3%, it is apparent that PM's premium valuations are warranted for the accelerated bottom-line growth prospects.   So, Is PM Stock A Buy, Sell, or Hold?  PM 8Y Stock Price Trading ViewFor now, PM has further rallied since April 2024 levels of $89s, while appearing to retest the previous 2022 resistance levels of $107s and running away from its 50/ 100/ 200 day moving averages. Even so, based on the annualized dividend of $5.20 per share and the current stock prices, it continues to offer a relatively rich yield of 4.85%, with the recent capital appreciation triggering the lower yields compared to the 4Y averages of 5.32%. Despite so, we believe that PM may record further upside, based on its accelerated growth prospects. For reference, we had offered a long-term price target of $115.50 in our previous article, based on the consensus FY2026 adj EPS of $7.47 (expanding at a CAGR of +7.5%) and PM's FWD P/E valuation of 15.47x (near to its 5Y P/E mean of 15.7x). Based on our bull-case FY2026 adj EPS estimates of $8.00 (expanding at a CAGR of +10%, as discussed above), we believe that there may be a more than decent upside potential of +17.1% to our updated long-term price target of $125.60.  With its high growth and dividend investment thesis playing out as expected, we believe that PM continues to be highly compelling for opportunistic investors, warranting our reiterated Buy rating.  This is especially since the tobacco company continues to deliver robust performance metrics across its combustibles and smoke-free offerings, while growing market share and its customer base globally, further underscoring why it remains the big nicotine winner, as highlighted in our previous article.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.3","shortVersion":"4.26.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2454032097"}