There was a nice little piece this weekend in the WSJ about on of our favorite stocks/companies here at ValuePlays, Phillip Morris International (PM)
From the WSJ:
With most of the world in recession, expensive habits are fading fast. But international tobacco companies are still making smokers pay up for a hit.
While many consumer-products companies have capped prices, the likes of Philip Morris International and London-listed British American Tobacco are raising them. With cigarette sales likely in permanent decline in some markets, producers have focused on price.
Heard on the Street columnist John Jannarone explains to Simon Constable how premium cigarette manufacturer Philip Morris is actually getting a boost from foreign governments. Plus how industry consolidation is giving profits an extra lift.
That has helped some tobacco companies smoke market expectations. PMI’s shares have risen 8% since Thursday morning, when it said higher prices had boosted second-quarter profits. In the European Union prices rose about 5%, the fastest pace in over a year, according to Thilo Wrede of Credit Suisse.And tax laws can actually work in favor of premium tobacco companies. Many countries tax cigarettes by the pack rather than as a proportion of the retail price.
That has caused low-end cigarette prices to rise more quickly than premium cigarettes. In France, for instance, premium cigarettes only cost 15% more than the cheapest option, according to Morgan Stanley’s David Adelman.
PM reported last week and raised full year guidance. Shares are up over 40% from the March lows and 8% last week as a result of earnings. They currently have a dividend yield of 4.5%.
Disclosure (“none” means no position):Long PM