Philip Morris Announces New Buyback

Global tobacco manufacturer and seller, Philip Morris International Inc. ( PM - Analyst Report ) , recently announced a share buy back program of $18.0 billion to commence on August 1, 2012, as approved by its board of directors.

The new program will start soon after the completion of the ongoing $12 billion share buyback program which commenced in May 2010. Under the ongoing program, Philip Morris has bought 154,504 shares worth $9.85 billion till March 2012. Roughly $2.0 billion shares still exist under the ongoing program.

Philip Morris delivered encouraging first quarter 2012 earnings of $1.27 per share surpassing the year-ago earnings of $1.06 by 19.8% and the Zacks Consensus Estimate of $1.19 by 6.7%.

During the reported quarter, Philip Morris spent $1.5 billion to repurchase 18.1 million shares. The company has a target of buying back shares worth $6.0 billion during 2012.

Moreover, since May 2008, when Philip Morris began its first share repurchase program, the company has spent a total of $22.9 billion to repurchase 432.1 million shares.

Philip Morris also declared a regular quarterly dividend of 77 cents per common share, payable on July 12, 2012, to stockholders of record as of June 27, 2012.

Philip Morris has been returning value to its shareholders regularly. It raised its regular quarterly dividend by 20.3% to 77 cents per share in September 2011, up from 64 cents per share earlier. This was the fourth consecutive annual dividend increment after the company spun out from Altria Group Inc. ( MO - Analyst Report ) in 2008. Since its spin off, the company has hiked its dividend by 67.4%.

Philip Morris has a successful multi-brand strategy. The company has seven of the world’s top 15 brands, including Marlboro, the number one cigarette brand worldwide. However, rising illicit trade and the Food and Drug Administration’s (‘FDA’) imposition on using warning labels on cigarette packs which will not only scare smokers but also incur huge printing expenses, negatively impacting the industry are matters of concern.

Currently, we have a long-term Neutral recommendation on Philip Morris, which carries a Zacks #3 Rank (short-term Hold rating).