Philip Morris: A Risky Investment Gamble?

Philip Morris International (PMI) is a tobacco company that delivers smoke-free products and is evolving its portfolio to include products outside the tobacco and nicotine sectors. The company's current average brokerage recommendation (ABR) is 1.89, which falls between Strong Buy and Buy. Of the 14 recommendations, eight are Strong Buy and one is Buy. However, making an investment decision based solely on this information may not be wise, as brokerage recommendations have shown limited success in guiding investors towards stocks with the highest potential for price appreciation.

PMI has demonstrated robust financial performance, with impressive gross profit margins of 63.69% for the last twelve months as of Q1 2024. The company has also raised its dividend for 16 consecutive years, reflecting a strong commitment to shareholder returns. With a dividend yield of 4.75%, it is an attractive option for income-focused investors.

In terms of business performance, PMI has showcased growth in organic shipment volume, including cigarettes, heated tobacco, and oral tobacco, with a collective rise of 2.8%financial performance exceeded expectations, with net sales, operating income, and adjusted diluted earnings per share (EPS) growing by 9.6%, 12.5%, and 10.6% respectively.

Considering these factors, buying PMI stock may be a wise investment, but it is important for investors to conduct their own comprehensive analysis before making any investment decisions.

Philip Morris's average brokerage recommendation (ABR)

As of March and May 2024, Philip Morris International (PM) has an average brokerage recommendation (ABR) of 1.89, on a scale of 1 to 5 (Strong Buy to Strong Sell). This ABR is calculated based on the recommendations (Buy, Hold, Sell, etc.) made by 14 brokerage firms. An ABR of 1.89 approximates between Strong Buy and Buy.

Of the 14 recommendations, eight are Strong Buy and one is Buy. This means that Strong Buy and Buy respectively account for 57.1% and 7.1% of all recommendations.

Although the ABR suggests buying Philip Morris, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to choose stocks with the best price increase potential.

The Zacks Rank

As of May 2024, Philip Morris International (PM) had a Zacks Rank of #4 (Sell). This was due to a 1.5% decline in the Zacks Consensus Estimate for the current year, indicating analysts' growing pessimism about the company's earnings prospects.

In February 2024, Philip Morris had a Zacks Rank of #3 (Hold). This was based on the size of the recent change in the consensus estimate and three other factors related to earnings estimates.

Philip Morris has been expanding its business in the reduced-risk products (RRPs) or smoke-free products category, with net revenues from these products forming 39.3% of the company's total revenues in the fourth quarter of 2023. The company is working towards becoming a majority smoke-free company by 2030.

Philip Morris's financial performance

Philip Morris International (PMI) is a leading tobacco company with a global presence in over 180 markets. The company's financial performance has been the subject of recent analysis by Wall Street and Zacks Equity Research. While brokerage recommendations indicate a "Strong Buy" or "Buy", Zacks suggests a more cautious approach with a "Hold" or "Sell" rating.

Brokerage Recommendations:

Philip Morris currently has an average brokerage recommendation (ABR) of 1.89, which falls between "Strong Buy" and "Buy" on a scale of 1 to 5. This rating is based on recommendations from 14 brokerage firms, with eight "Strong Buy" and one "Buy" ratings. This suggests that the majority of analysts view the company as a promising investment opportunity.

Zacks Equity Research Analysis:

Zacks Equity Research provides a different perspective, suggesting that investors exercise caution when considering an investment in Philip Morris. Their analysis focuses on earnings estimate revisions and the Zacks Consensus Estimate.

As of March 2024, the Zacks Consensus Estimate for the current year remained unchanged at $6.39, indicating analysts' steady views on the company's earnings prospects. This resulted in a Zacks Rank #3 ("Hold") for Philip Morris.

However, by May 2024, the Zacks Consensus Estimate for the current year had declined by 1.5% to $6.29 over the past month. This decline reflected analysts' growing pessimism about the company's earnings prospects, leading to a Zacks Rank #4 ("Sell") for Philip Morris.

Financial Ratios:

Business Strategy:

Philip Morris International is focused on delivering a smoke-free future by replacing cigarettes with less harmful alternatives. Their leading smoke-free product, IQOS, is marketed under brand names such as TEREA and HEETS. The company aims to balance profitability with sustainability by investing in innovation and delivering sustainable growth from smoke-free products.

Recent Performance:

Philip Morris has been actively acquiring companies to strengthen its position in the nicotine market. For example, they acquired Swedish Match to become the market leader in nicotine pouches. They have also acquired companies like Otitopic, Fertin Pharma, and Vectura, demonstrating their commitment to diversifying their product offerings.

While brokerage recommendations suggest a positive outlook for Philip Morris, Zacks Equity Research and other sources indicate that investors should approach an investment in the company with caution. The company's financial performance appears to be mixed, with analysts' views evolving over time. Therefore, investors should conduct their own thorough research and consider multiple factors before making any investment decisions regarding Philip Morris.

The company's smoke-free products

Philip Morris International (PMI) has a growing portfolio of smoke-free products that offer a range of different choices for adult smokers. These alternatives to smoking include heated tobacco, e-vapour, and oral smokeless products.

Heated tobacco products, also known as heat-not-burn products, heat tobacco to generate a nicotine-containing vapour without smoke or ash. This is achieved through induction, heating tobacco from within a 'stick' without burning it. The vapour emitted contains 95% lower levels of harmful chemicals compared to cigarettes.

E-vapour products, or vapes/e-cigarettes, produce a nicotine-containing vapour without using tobacco.

The third product category is oral smokeless products, such as nicotine pouches and snus. Nicotine pouches do not contain tobacco and allow the user to absorb nicotine through a cellulose pouch, placed between the gum and the cheek or upper lip. Snus products are similar but do contain smokeless tobacco.

These alternatives to smoking are not risk-free and provide nicotine, which is addictive. They are only recommended for adults who would otherwise continue to smoke.

Philip Morris's dividend yield

Philip Morris International (PMI) is a tobacco company based in Stamford, Connecticut. The company's product portfolio primarily consists of cigarettes and smoke-free products.

As of July 31, 2024, the current dividend yield for Philip Morris is 4.53%. The company has a history of paying dividends, with a payout ratio of 84.90%. The most recent dividend payment was made on July 8, 2024, at a rate of $1.3 per share, amounting to an annual dividend yield of 4.59%.

When considering whether to invest in Philip Morris, it is important to look beyond dividend yields and consider other factors as well. While brokerage recommendations can provide some insight, they may not always be reliable. For instance, as of March 2024, Philip Morris had an average brokerage recommendation (ABR) of 1.89, indicating a "Strong Buy." However, this rating should be taken with a grain of salt, as brokerage firms tend to have a positive bias towards the stocks they cover.

Other tools, such as the Zacks Rank, can be used to validate brokerage recommendations and make more informed investment decisions. The Zacks Rank is a quantitative model that takes into account earnings estimate revisions and can be a more timely indicator of future stock price movements. As of March 2024, Philip Morris had a Zacks Rank of 3 (Hold), indicating that investors should be cautious and consider other factors beyond brokerage recommendations when deciding whether to invest in the company.

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