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Philip Morris International, Inc. Message Board

  • corvette_kid1 corvette_kid1 Oct 22, 2009 12:11 PM Flag

    Analyst Comments Mostly Upbeat



    Altria Group Inc (MO)
    3Q09 Volumes Disappoint, but We Expect EPS to Remain Decent
     3Q09 EPS beat consensus due to tax — Adjusted EPS was $0.48, 1¢ above Citi
    and 2¢ above consensus. This beat was entirely due to a lower tax rate.
     Volume declines raise new questions — Most disappointing, PM USA volumes
    were 9% below our forecasts. Management says this mainly reflected stocking
    issues, as retail market share trends were OK. Although few investors are
    taking anything on trust now, we think volume trends will look better in 2010.
     PM USA pricing and margins were significantly stronger than forecast — The
    weak volumes were offset by strong pricing and margin gains, demonstrating
    that the industry is exercising enough pricing discipline to ensure EPS growth.
    We are confident this will continue, even though PM USA's market share is
    likely to remain under pressure.
     We think the market is spending too much time worrying about smokeless — In
    retrospect it is clear MO has destroyed value with the UST acquisition and financing,
    but this is in price now. Smokeless is likely to contribute only 10% of EBIT next year.
    By contrast SABMiller, arguably the best managed brewer globally, with 85% of
    EBIT coming from emerging markets, is likely to contribute 9% of MO's EBIT.
     Stock remains cheap even though we can't see a catalyst — We retain our Buy
    on the stock mainly on valuation grounds. MO is on a prospective dividend
    yield of 7.5% while 10-year Treasuries yield 3.4%, despite the fact that MO's
    earnings are protected from inflation by its pricing power. MO is now on a lower
    P/E than Reynolds.
    EPS Q1 Q2

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