Philip Morris International (NYSE:PM)

CAPS Rating: 4 out of 5

The company manufactures and sells cigarettes and other tobacco products in markets outside of the United States.

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Member Avatar TMFDeej (99.40) Submitted: 6/30/2014 2:53:16 PM : Underperform Start Price: $84.40 PM Score: +1.29

Normally I don't like to short companies because I don't like rooting against them, however I will make an exception for a company that pedals poison in many countries where potential "consumers" aren't educated enough about the harmful health impact of smoking.

Even after Philip Morris' lackluster stock performance over the past couple of years, it still trades at 16 times forward earnings...higher than its historical average.

People often cite the company's growing dividends as a reason to own the stock well much of that growth hasn't been as a result of the company's earnings, but instead was just a return of borrowed capital. Since the end of '08, PM has spent $56 billion on buybacks and dividends, but only generated $43 billion in free cash flow. For now PM's debt level is a manageable 2x EBITDA, but it's rising fairly rapidly. The Company's own CFO even recently admitted that PM will “will have to bring our cash outflow in line with our inflow.” Guess what that means? Even fewer buybacks, less dividend growth or even worse for investors a dividend reduction are in the cards.

Somehow cigarette consumption hasn't declined as rapidly as I had anticipated, but the increased adoption of e-cigarettes may change that. PM's performance hasn't been all that great to begin with lately add to that an end to the smoke and mirrors that it has been using to boost its EPS and dividend and a potential drop sales for its products and this is not a stock that I personally would want to be long.

Jason

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Member Avatar MrMighty (< 20) Submitted: 6/5/2014 2:01:53 PM : Outperform Start Price: $86.96 PM Score: -4.86

Has top brands in its stable. This company is a cash machine.

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Member Avatar tsunamied (84.73) Submitted: 5/21/2014 6:54:40 AM : Outperform Start Price: $84.32 PM Score: -5.21

dividends baby

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Member Avatar JamesBrown (61.47) Submitted: 5/9/2014 9:37:56 AM : Outperform Start Price: $85.40 PM Score: -7.11

Rising Dividends

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Member Avatar KenN513 (< 20) Submitted: 4/27/2014 12:49:31 AM : Outperform Start Price: $83.70 PM Score: -5.06

This company's dividend yield is 4.5% and the dividend has grown 10.1% during the last five years. The Chowder Number is 14.6%. The company is fairly priced at about $84. I would like to see the payout ratio lower, however. Not a super high flyer, just steady, better than S&P 500 growth.

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Member Avatar mwaqar (< 20) Submitted: 4/22/2014 3:43:52 AM : Outperform Start Price: $82.48 PM Score: -3.52

Big upside

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Member Avatar afewgoodstocks14 (49.19) Submitted: 4/10/2014 4:21:58 PM : Outperform Start Price: $81.14 PM Score: -5.06

Div. (Yield) $3.76 (4.5%)

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Member Avatar 20Punches (47.76) Submitted: 4/1/2014 3:33:06 PM : Outperform Start Price: $81.07 PM Score: -1.51

Punch #10 - Q12014 – will be Phillip Morris International (PM)

“I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty.” – Warren Buffett

Phillip Morris International sells Malboro, and other brands, in all available markets outside of the U.S. The old Phillip Morris (before the MO and PM split) was (I’m fairly certain) the most profitable stock of the 20th century.

The industry has gotten a lot of negative press (even moreso than usual for the tobacco industry) due to increased anti-tobacco activism. These issues are nothing new for PM, and the tobacco company shareholder *should* continue thrive for at least another generation or two, in my opinion. As the industry slowly declines, PM’s dominant position will probably continue to widen. It’s extremely unlikely that any new, meaningful competitors will enter this industry, and PM stands poised to swallow up smaller competitors as the industry slowly declines. It may seem odd, but PM’s moat is actually strengthened by a slowly declining industry. (See Bruce Greenwald’s book “Competition Demystified” for more on that phenomenon) These recent sell ratings, general tobacco pessimism, and PM’s relatively poor stock performance (PM has been flat while that market is up over 35% over the past 20+ months) are all BUY signals, in my view.

While overall volumes will surely decrease overtime, price increases should be more than able to compensate, so revenue should remain pretty steady for the foreseeable future. Any tax increases imposed can be easily passed down to the customer as well. Virtually no business has pricing power as extreme as PM does. Also, they operates in so many countries, that it is pretty well diversified from individual regulation. The economics of PM are so insanely good, that per-share profits should continue to increase for the foreseeable future, albeit much more slowly than they have in the past. Also, don’t forget that tobacco companies provide A LOT of tax revenue to the countries they operate in, and most governments really need revenue right now. It is not in any governments economic interest to make smoking illegal.

Consider this scenario: if net income grows at just 4% per annum over the next 5 years, and buybacks continue at 4% of shares outstanding per annum – both reasonable assumptions - than EPS will grow to around $7.83 over the next 5 years. Put a reasonable 15x multiple on that, you get a share price around $117 in 5 years. If you put a conservative 4% per annum growth rate on the dividend as well, PM will pay you about $20 in dividends over the next 5 years. $117 + 20 = $137 total return, which from today’s price of $81.92, translates into a 10.8% annualized total return.

That's just one of many possibilities, but considering rational range of outcomes for PM, vs that of a realatively more expensive S&P 500 (which historically returns 6-8% per year including dividends), I think PM has a very good chance of outperforming for the foreseeable future, particularly if the market doesn’t do very well overall.

And, perhaps more importantly, if I’m wrong, you’ll still do ok. (4.9% forward dividend yield provides significant downside protection as long as profits remain stable)

This, like all 20punches picks, is intended to be an asymetrical bet - heads you win big, tails you still do ok.

PM outperform.

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Member Avatar MrMonopoly (77.84) Submitted: 3/25/2014 12:51:26 AM : Outperform Start Price: $78.85 PM Score: +0.58

The export of hipsters is booming, but they might ironically smoke e-cigs.

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Member Avatar BaseBawl (25.96) Submitted: 3/14/2014 11:44:57 AM : Outperform Start Price: $78.50 PM Score: +0.64

Buybacks and dividend growth.

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Member Avatar Gervais001 (61.20) Submitted: 3/12/2014 10:14:21 PM : Outperform Start Price: $77.37 PM Score: +1.73

In an age of declining cigarette sells in the US, Philip Morris is still growing markets over seas. Smart decision making by management has filled the coffers to over-flowing. Even if sells decline at a rate of 2-3% in the US this will be more than off-set by the growth overseas. With such free cash flows, growth of dividends is almost guaranteed with maybe a special dividend in the works.

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Member Avatar Gardetto (< 20) Submitted: 2/15/2014 11:19:16 PM : Outperform Start Price: $78.45 PM Score: -0.11

Philip Morris International has been battered over the last few months but will be buoyed by it's nearly 5% dividend yield. Although there are no major catalysts in the near to medium term for significant capital appreciation, I'm confident the stock is a good place to park some loose change over the next several months.

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Member Avatar Guru (< 20) Submitted: 2/10/2014 12:21:51 PM : Outperform Start Price: $77.27 PM Score: -1.19

PM will gain significantly with impending recovery in Europe, Asia and Latin America.

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Member Avatar freecapital (73.83) Submitted: 2/5/2014 5:14:54 PM : Outperform Start Price: $75.19 PM Score: -0.71

http://boards.fool.com/fka-pm-31099935.aspx?sort=whole#31103514

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Member Avatar jsch08 (32.59) Submitted: 1/28/2014 11:26:18 AM : Outperform Start Price: $78.98 PM Score: -3.98

People still smoke

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Member Avatar sagitarius84 (< 20) Submitted: 1/24/2014 6:58:50 PM : Outperform Start Price: $79.84 PM Score: -4.92

PM has attractive valuation, earnings growth, buys back stock, pays an above average and growing dividend. It is a cash machine to hold for the long run

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Member Avatar jamaral11 (73.04) Submitted: 1/2/2014 11:03:08 AM : Outperform Start Price: $84.59 PM Score: -8.06

dividends

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Member Avatar afewgoodstocks11 (27.64) Submitted: 12/30/2013 11:38:05 AM : Outperform Start Price: $60.27 PM Score: -24.19

Div. (Yield) $3.76 (4.3%)
Current Yield . . . . . . .6.10%

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Member Avatar slider10 (< 20) Submitted: 11/6/2013 1:34:15 PM : Outperform Start Price: $88.03 PM Score: -15.67

Probably entering a slower growth phase than the past few years, but should still outperform the market. The company seems to be one of the better ones as far as dividends + stock buybacks.

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Member Avatar enable1 (< 20) Submitted: 10/4/2013 3:55:54 PM : Outperform Start Price: $84.17 PM Score: -16.67

Despite dire warnings, sales continue to rise, especially in Asia, Africa, and in underdeveloped countries. Habit will overcome common sense anytime!

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