PM

Philip Morris’ Smoke-Free Portfolio Continues to Deliver

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Image: Philip Morris’ shares have done quite well of late. By Brian Nelson, CFA Philip Morris (PM) reported better than expected fourth quarter results February 6 that revealed a beat on both the top and bottom lines. In the fourth quarter, net revenue grew 9.2% (9% organically), while gross profit advanced 15.1%. Philip Morris’ smoke-free business accounted for 40% of its total net revenues and approximately 42% of gross profit, up 0.7 percentage points and 0.9 percentage points, respectively, versus the same quarter last year. There is now an estimated 38.6 million adult users of Philip Morris’ smoke-free products, which is up 5.3 million versus December 2023. Management had the following to say about performance in the press release: 2024 … Read more

Philip Morris Raises 2024 Guidance, Shares Catapult to All-Time Highs

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Image: Shares of Philip Morris catapult to all-time highs. By Brian Nelson, CFA On October 22, Philip Morris (PM) reported better than expected third quarter results that showed a beat on both the top and bottom lines. Reported net revenue advanced 8.4% on 11.6% organic growth in the quarter. Gross profit increased 9.5% on reported basis and 13% organically. Operating income was up 8.4% on a reported basis and 13.8% organically versus the prior year’s quarter. Adjusted diluted earnings per share, excluding currency, came in 18% higher versus last year’s quarter, to $1.97 per share. Management was pleased with the performance: In the third quarter, we delivered exceptionally strong performance, with record quarterly net revenues and earnings per share. This … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

Philip Morris Puts Up Excellent Second Quarter Results, Raises 2024 Guidance

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Image: Philip Morris’ stock has done quite well over the past few months. By Brian Nelson, CFA On July 23, Philip Morris (PM) reported excellent second quarter results with both revenue and non-GAAP earnings per share coming in better than expectations. Net revenue advanced 5.6% on a reported basis and 9.6% organically. Adjusted operating income increased 3.5% on a reported basis or 12.5% excluding currency and acquisitions. Its adjusted operating income margin increased 1.1 percentage points excluding currency and acquisitions, while adjusted diluted earnings per share increased 10.6%, excluding currency. Management’s commentary was upbeat: The excellent momentum of our smoke-free business continued with an outstanding second-quarter and first-half performance. The powerful combination of excellent underlying performance and proactive measures across … Read more

Philip Morris Targeting Strong Adjusted Diluted EPS Growth

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Image: Philip Morris’ stock has traded sideways for more than a year now. By Brian Nelson, CFA On April 23, Philip Morris (PM) reported solid first-quarter results that beat expectations on both the top and bottom lines. Net revenues increased 9.7% in the first quarter, while operating income advanced 11.5%. The company’s adjusted operating income increased 11.3% thanks to a 0.9 percentage point increase in its adjusted operating income margin, to 38.2%. Adjusted diluted earnings per share grew to $1.70, up 23.2% excluding currency. The company continues to work toward becoming a smoke-free company, with its smoke-free business now accounting for roughly 39% of its total net revenues. Management had the following to say about the quarter: The strength of … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

Earnings Roundup: PEP, DIS, ARM, PM

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By Brian Nelson, CFA Dividend Aristocrat Pepsi (PEP) Raises Dividend for 52nd Consecutive Year On February 9, Best Ideas Newsletter portfolio holding Pepsi reported mixed fourth quarter results that showed revenue pressures but a modest beat with respect to non-GAAP earnings per share. Organic revenue growth was 4.5% in the period, lower than the consensus forecast calling for 5.9% expansion, while core constant currency earnings per share increased 9%. The company experienced organic volume declines across the board in its operating divisions, with the greatest weakness coming from its Quaker Foods North America segment, where volumes fell 8%. Management seemed cautious in the quarterly press release noting that it “navigated another year of elevated levels of inflation, macroeconomic volatility, geopolitical … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

Use Both the Dividend Cushion Ratio (Probability of a Dividend Cut) and the Qualitative Dividend Ratings in Your Assessment of the Payout

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The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. By Brian Nelson, CFA Dividend investing has probably never been as popular as the past couple years. Remember, however, the dividend is capital appreciation that otherwise would have been achieved had the dividend not been paid. If you had a stock that was $10, and it paid a $1 dividend, you don’t have a $10 stock and … Read more

Philip Morris Raises Adjusted Diluted EPS Outlook

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By Brian Nelson, CFA On October 19, Philip Morris (PM) reported excellent third-quarter 2023 results that showed currency-neutral revenue advancing 16.4%, and non-GAAP adjusted diluted earnings per share beating the consensus forecast, increasing more than 20% to $1.67 per share. The company continues to benefit from strong pricing across its combustible tobacco portfolio, its integration of its purchase of Swedish Match, and the popularity of its nicotine pouch ZYN, where shipment volume in the U.S. increased ~66% from the year-ago period. In conjunction with its strong third-quarter report, Philip Morris raised its outlook for adjusted diluted EPS to the range of 10%-10.5% expansion, excluding currency. The firm’s latest dividend increase was ~2.4%, to $1.30 per share, and its payout now … Read more