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Shares of the tobacco giant Philip Morris International (PM - Analyst Report) reached 52-week high of $95.42 on Wednesday, Apr 10, in anticipation of a robust first quarter 2013 earnings scheduled to be released on Apr 18, 2013 They surpassed the previous 52-week high of $94.45 on Apr 2.
The closing price of the cigarette manufacturer was $95.26 on Apr 10, representing a solid 1-year return of about 8.84% and year-to-date return of about 9.82%. Average volume of shares traded over the last three months stands at approximately 4429K.
With premium positioning of strong brands, global scale, and a leading market share Philip Morris is able to beat estimates and deliver higher earnings in the first quarter of 2013.
Philip Morris has a strong brand portfolio of cigarettes, which helps it to command a leading market share in the tobacco industry. Marlboro leads the brands and has the largest market share among its close competitors. Marlboro’s market share has been rising sequentially for several quarters. In 2012, the share of this leading brand reached 9.3%.
On the other hand, Philip Morris’ ability to adapt to changing consumer demand allows it to maintain its earnings growth. The company is scheduled to prepare a set of ‘Next Generation Product’ (NGP) in the year 2014, which is aimed at attracting adult consumers to use its products while at the same time reducing the risks related to tobacco products. This comes amid vigorous anti tobacco campaigns all around the world.
The company reported modest earnings gain in the recently concluded 2012-fourth quarter. Adjusted fourth-quarter 2012 earnings per share of $1.24 surpassed the comparable prior-year quarter earnings by 12.7% and beat the Zacks Consensus Estimate of $1.22. Earnings shot up on the back of higher revenues and favorable impact of lower shares outstanding.
Excluding the impact of currency translation and acquisitions, net revenues increased roughly 6.4% from the prior-year quarter, mainly driven by favorable pricing.
For 2013, Philip Morris expects earnings to be in the range of $5.68 to $5.78 per share, representing a growth rate of approximately 10% to 12% versus adjusted earnings of $5.22 per share in 2012.
Philip Morris has been a regular dividend payer and its annualized dividend is $3.24 with a dividend yield of about 3.4%. The company had raised its dividend by 10.4% to 85 cents in Sep 2012 from 77 cents paid earlier.
It was the fifth consecutive annual dividend increment after the company was spun out from Altria Group Inc. (MO - Analyst Report) in 2008. The previous four dividend increases were 17.4%, 7.4%, 10.4% and 20.3% in 2008, 2009, 2010 and 2011 respectively.
Other Stocks to Consider
Philip Morris currently carries a Zacks Rank #3 (Hold). However, there are other favorable stocks in the tobacco sector that are worth considering. They include Lorillard Inc (LO - Analyst Report) with a Zacks Rank #2 (Buy) and Macy’s Inc (M - Analyst Report) with a Zacks Rank #1 (Strong Buy).