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Philip Morris International is a holding company. Through its subsidiaries and affiliates, Co. is engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the U.S. Co.'s portfolio of international and local brands include Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris and Red & White. Co. also owns a number of local cigarette brands, such as Sampoerna, Dji Sam Soe and U Mild in Indonesia, Fortune, Champion and Hope in the Philippines, Diana in Italy, Optima and Apollo-Soyuz in Russia, Morven Gold in Pakistan, Boston in Colombia, Belmont, Canadian Classics and Number 7 in Canada. 



In our opinion PM’s moat is based on  its tobacco brands' which have created an immense loyalty among tobacco users toward the brands they enjoy. Philip Morris has an impressive brand portfolio that is quite evenly balanced across price points. The addictive nature of tobacco products makes demand fairly price inelastic, and with few substitute products.



Philip Morris faces hurdles in a large market. Britain's new rule will force PM to adopt plain, standardized packets in 2016.  We don't believe the law will have a significant impact on PM's business. Meantime, foreign exchange headwinds continue to mount. he dividend is safe, and we estimate the payout ratio will exceed historical norms. PM's current distribution of $4 per share (annualized) currently makes up about 90% of our forecasted 2015 profit total. That's well above the company's targeted ratio of around 60%-70%, and could lead to a reduction in dividend growth until currency impacts go away. The stock is good choice for conservative, income-oriented potfolios.



  • Leading market position built on a strong brand portfolio

  • Strong R&D capabilities

  • Geographical diversification reduces dependency risks


  • Legal issues tarnish brand image


  • Increasing excise taxes

  • Stringent advertising regulations on promotion and packaging of tobacco products

  • Restrictions on public smoking

  • Counterfeit cigarettes and growing illicit trade


  • Growing snus and other smoke-free tobacco products market

  • Increasing demand for e-cigarettes

  • Growing cigar market

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  


The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.


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