Let’s start with the obvious: Philip Morris International Inc. (NYSE:PM) sells products proven to be hazardous to people’s health. But that wasn’t enough to keep investors from sending it up 9% after earnings.
Trendiness was never the appeal of PM stock anyway; the appeal is a solid, stable business. Indeed, Philip Morris is managing to expand its market share and beat analysts’ estimates despite challenges with a strong dollar.
Although PM stock has had a rough road of late, Q1 2015 earnings are giving investors hope in a company that seems to bounce back every time it’s down. Here are a few reasons I believe Philip Morris is a good bet right now.
Philip Morris Is Doing Well Despite the Strong Dollar
Everyone is talking about the fact that the dollar is strong now against other currencies, which is great if you’re vacationing in Paris but lousy for companies like PM that derive their revenue from overseas markets.
One great sign for PM is that it managed to beat analysts’ estimates despite the fact that the dollar is extremely strong compared to currencies like the euro.
The dollar won’t remain as strong as it is now forever, and when it weakens Philip Morris will stand ready to gain from the fluctuation.
PM’s numbers for Q1 2015 might have some analysts doing double-takes. Philip Morris earned $1.16 per share for the quarter, topping the $1.02 estimate of eight analysts from Zacks Investment Research. Although Q1 2015 profit was down, this was largely due to the dollar’s strength.
And revenue for the period was $6.62 billion, which beat analysts’ estimates of $6.25 billion. PM earned $1.8 billion for the quarter, compared to it earned $1.88 or $1.18 per share for the same period last year.
The company’s market share increased in several countries, including France, Germany, Japan and Argentina. And Philip Morris raised its full-year EPS guidance from $4.27-$4.37 per share to $4.32-$4.42.
Even in a country like Russia where tax increases on tobacco have affected sales, PM has increased market share and can be encouraged by the fact that its lower sales there have been offset with gains in countries such as Singapore and the Philippines.
One of the biggest positives about owning PM stock is the healthy dividend it pays. Philip Morris pays a dividend of 5.12%, putting it in league with the relatively few companies that pay dividends above 5%.
Although earnings were down for the quarter, it’s believed PM will be able to maintain its dividend due to increased market share around the globe and an increase in the price of its premium cigarettes.
Bottom Line
PM will probably never top the list of most-liked companies, as it makes products that have been demonized for years.
But most investors really don’t care about whether a company is liked or not, as long as the business is stable, and, in this case, it pays a good dividend. As it stands, PM checks both of those boxes.
As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.
