5-Star Stocks Poised to Pop: Philip Morris
Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, global tobacco giant Philip Morris International (NYSE: PM), sister company of Altria (NYSE: MO), has earned a coveted five-star ranking.
With that in mind, let's take a closer look at Philip Morris' business and see what CAPS investors are saying about the stock right now.
Philip Morris facts
Headquarters
New York City
Market Cap
$102.5 billion
Industry
Tobacco
Trailing-12-Month Revenue
$26.9 billion
Management
Chairman/CEO Louis Camilleri (since 2008)
CFO Hermann Waldemer (since 2008)
Return on Capital (Average, Past 3 Years)
30.3%
Cash/Debt
$1.6 billion / $15.2 billion
Dividend Yield
4.6%
Competitors
British American Tobacco (NYSE: BTI)
Reynolds American (NYSE: RAI)
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS
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On CAPS, 98% of the 2,324 members who have rated Philip Morris believe the stock will outperform the S&P 500 going forward. These bulls include All-Star CPACAPitalist and dcrednek.
Less than two months ago, CPACAPitalist explained why Philip Morris is a huge draw:
Apparently cigarettes are addictive! And apparently people in emerging markets like to smoke a lot! [Philip Morris sells] cigarettes to a lot of emerging markets, therefore [Philip Morris] has a captive (almost literally) and large consumer base. That, and its cheap right now. And has a sweet dividend.
Despite sharing the iconic Marlboro brand with Altria and owning about 16% of the non-U.S. cigarette market, Philip Morris currently trades at a slight P/E discount to rivals British American and Reynolds. And while multinational giants like Coca-Cola (NYSE: KO) derive 74% of their sales outside of North America, my fellow Fool Andy Louis-Charles recently reminded us that Philip Morris earns 100% of its sales outside the U.S. When you couple that "pure" international exposure with a juicy yield of 4.6%, it's easy to see why Fools like Philip Morris as an ideal way to diversify out of the dollar.
CAPS member dcrednek elaborates:
This company's earnings are strong and predictable. The cash flow generated by [Philip Morris] is monstrous. And given the current state of public finances around the world, I just don't see how many investors can conclude that an investment in [Philip Morris] is a greater risk than, say, US Treasuries, where the 10-year yield is hovering around 2.74%. [Philip Morris] shares would have to be priced at $143.41 in order for its cash yield per share to drop to 2.74%
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