Tag: PM

Phillip Morris International Reports & Issues Deceptive Guidance

Post author By ToddSullivan
Post date February 4, 2009

This is not deceptive in the way most folks would think, that they are hiding something, but deceptive in that if you do not read it close, you will not have an accurate picture.

Phillip Morris International (PM) Reported:
2008 Full-Year

Full-year diluted earnings per share of $3.32, up 16.1% from $2.86 in 2007,
Adjusted 2008 full-year diluted earnings per share of $3.32, up 18.6% from the 2007 pro-forma adjusted earnings per share of $2.80. Excluding currency, adjusted 2008 full-year diluted earnings per share were up 13.2%

2008 Fourth-Quarter

Fourth-quarter diluted earnings per share of $0.71, down 4.1% from $0.74 for the same period in 2007, including the items detailed on Schedule 7
Adjusted fourth-quarter diluted earnings per share of $0.71, down 1.4% for the same period in 2007 from the pro-forma adjusted earnings per share of $0.72. Excluding currency, adjusted fourth-quarter diluted earnings per share were up 12.5%
Spent a total of $5.4 billion to repurchase 106.8 million shares of its common stock in 2008; increased the dividend by 17.4% in 2008 to an annualized rate of $2.16 per share
During 2008, acquired Rothmans Inc. of Canada and the fine cut trademark Interval
Forecasts 2009 full-year diluted earnings per share to a range of $2.85 to $3.00, at current exchange rates, versus $3.32 in 2008. Excluding an adverse currency impact of $0.80 per share, 2009 guidance is projected to increase by 10%-14%
As announced on February 3, 2009, PMI entered into an exclusive 50:50 joint venture agreement with Swedish Match AB to commercialize smoke-free tobacco products worldwide, excluding Scandinavia and the USA
Announces an agreement to acquire the rights to the Petteroes trademark, the leading fine cut brand in Norway

“Our operating performance in 2008 was exceptionally strong and our results exceeded our constant currency growth targets for both the full year and the fourth quarter. Our first year as an independent company was also marked by significant progress on numerous strategic fronts and specifically behind our efforts to improve our speed to market and enhance the vibrancy and equity of our strong brand portfolio,” said Louis Camilleri, Chairman and Chief Executive Officer.

“The global economic crisis obviously results in uncertainty, particularly on the currency front, and at current exchange rates we face a steep hurdle. Nevertheless, we enter 2009 with solid momentum and confident in our ability to meet our constant currency income growth targets. Our commitment to judiciously invest in the growth of our business and deliver superior returns to our shareholders over the long term remains as steadfast as ever.”

Dividends and Share Repurchase Program

During the fourth quarter, PMI announced a regular quarterly dividend of $0.54. PMI increased its dividend by 17.4% in August 2008 to an annualized rate of $2.16 per share.

In the fourth-quarter, PMI spent $888 million to repurchase 20.6 million shares of its common stock. Since May 2008, when PMI began its previously-announced $13 billion, two-year share repurchase program, the company has spent a total of $5.4 billion to repurchase 106.8 million shares.

Acquisitions

In 2008, PMI acquired all of the outstanding common shares of Rothmans Inc. of Canada for CAD $30.00 per share in cash, representing an aggregate transaction value of approximately CAD $2.0 billion. The Canadian business’ results were incorporated into the renamed Latin America & Canada segment as of September 19, 2008. These results were not material to PMI’s operating results for the fourth quarter 2008 or for the full-year 2008.

During the year, PMI also acquired the fine cut trademark Interval for 254 million euros.

PMI Enters into Agreement with Swedish Match AB

As separately announced on February 3, 2009, PMI has entered into an agreement with Swedish Match AB (SWMA) to establish an exclusive 50:50 joint venture to commercialize Swedish style snus and other smoke-free tobacco products worldwide, outside of Scandinavia and the USA. PMI and SWMA will license exclusively to the joint venture an agreed list of trademarks and intellectual property.

PMI has further licensed to SWMA certain PMI trademarks in Sweden and Norway, including 1847 by Philip Morris, PMI’s first product in the Swedish snus category launched in June 2008.

Acquisition of Petteroes

PMI has reached an agreement to acquire the rights to the Petteroes fine cut tobacco trademark worldwide and other cigarette trademarks sold primarily in Norway and Sweden.

In 2008, Petteroes had a 58% share of the Norwegian roll-your-own segment and a 7% share of the cigarette category. The brand recorded net revenues, excluding excise taxes, of approximately NOK 370 million (USD 54 million), and operating companies income of approximately NOK 260 million (USD 38 million), in the fiscal year ending June 30, 2008.

The transaction is subject to approval by the European Commission and certain individual country regulatory agencies and is expected to be completed during the first quarter of 2009. The transaction is projected be modestly accretive to net earnings in 2009.

2009 Full-Year Forecast

PMI forecasts 2009 full-year diluted earnings per share to a range of $2.85 to $3.00, at current exchange rates, versus $3.32 in 2008. Excluding an adverse currency impact of $0.80 per share, 2009 guidance is projected to increase by 10%-14%. This guidance excludes the impact of any potential future acquisition.

So, we know the dollar has had a nice rally of 12% in Q4 2008. PM sells tobacco in local currencies and then converts them into dollars, a strong dollar means that the $$ they take in from foreign currencies converts to fewer dollars, a weaker dollar mean the opposite.

Now, the dollar since then has fallen 7%. Now the exact timing of the transactions and the exchange rates determine the $$ amounts gain or loss but the trend is down. If you believe the trend will continue to fall, then the guidance that PM gave for profits is low, perhaps very much so

It will be interesting to watch unfolds but I am going on record saying that PM will blow past the $2.85 to $3 a share on 2009 they forecast…easily…

Oh, and we will be able to thank Ben Bernanke and Tim Geithner for running the dollar printing presses at full speed and debasing the value of the dollar…

Disclosure (“none” means no position):Long PM

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Reader Emails Answered: Oil, Financials, Recession, Dollar etc..

Post author By ToddSullivan
Post date January 12, 2009

Been getting a slew of emails the last months and rather than say the same things over and over, thought I would address them in a post since the themes are all similar..

1- Financials:
Will not be touching them and are currently waiting for Wells Fargo (WFC) to rally a bit to sell out of it. Why? I no longer know the rules of investing in them. TARP and its requirements change almost daily. Going forward, the term (interest) the Gov’t demands and the shareholder dilution that accompanies them will become more onerous. That is bad news. Also, the second body blow from housing is due this year and next. That means more suffering for financials and shareholders.

Now, this does not mean I will never invest in them again, just that I think in 2010 we will still be able to buy them at these levels or lower. Is there value in financials? I just cannot quantify it as long as we have shifting rules from the Gov’t.

2- The Market
Up to 9000, then back to 8000 all year. The market will bounce like a ball but never really go anywhere. I think the risk is to the downside as the recession worsens. Unemployment ought to pass 10%, GDP will be negative for the year and credit is still drying up. So, given those, how do we go to 10,000?

That being said, it is a traders market. If you sell options you can make some money here. If you trade the rang you can also. If you are not a trader, don’t try to be one. Be who you are

3- Oil
Have written a lot about it recently. Why? Demand has fallen true, but the unreported story is production has fallen off a cliff also. Oil is not like a faucet. It cannot just be turned back on. A drilling project shuttered because of low prices today cannot just be flipped back on when prices recover. There is a tremendous lag. As crazy as prices were at $147, they are equally as crazy at $47. US production continues to fall, Mexico’s has plummeted and OPEC is more in power than ever. That only serve to heighten the Geo-Political risk of oil. Translation? One wacko can cause a global oil price spike.

I see the most value here now, or at least a market unfettered by arbitrary Gov’t intervention. Yes, I know that most foreign oil companies are govt’t owned, what I am saying is that if you buy oil today, your ownership cannot be diluted by the gov’t like it can and is in equities today.

4- The dollar and inflation….
Has anyone ever seen a scenario when massive supply of an item has not caused a devaluation of it? How can the current US Gov’t’s “running the dollar printing presses full tilt” like they are now NOT lead to a devaluation of the dollar? Here is the problem. The gov’t WANTS inflation to return. It will increase home prices, increase to prices manufacturers get for their goods, increase equity values etc. The problem is, gov’t always overdoes it. That means that they will pump too much into the system and inflation will get away from them.

That genie, once out of the bottle is only pot back in by inflicting more pain on the economy. It then becomes a vicious circle…

5- What to buy?
Right now? I am buying nothing but oil. Why? As much as we have sen the rules of the game change in the past year, still more is due. TARP requirements are, the tax code is, a stimulus is coming (we do not know the composition of it) and a Democratic Congress has plenty on its agenda. What looks good today may not tomorrow. Does this mean you should not buy anything? No. There of course will be plenty of equities that do wonderful in the next year. I just think there will be plenty more that do not.

Management now matters more than ever. Keep it in mind when buying.

Am I selling? Only the financials (sold most in the fall). I still like what I hold, Dow Chemical (DOW), AutoNation (AN), ADM (ADM), Borders (BGP), Oil (DXO), (DBO), Phillip Morris International (PM), Sears Holdings (SHLD) and GE (GE). I do have misgiving about Immelt at GE but am willing to wait as I think they will be a big beneficiary of infrastructure stimulus.

All dominate their businesses (except Borders and Sears, they are plays on the majority shareholders Ackman and Lampert) and are picking up market share. Dow will lead us out of recession as whatever needs to be made, they make the stuff that makes it and it yields 10%.

Wait and see….

This is the environment that one can make purchases that make one look like a genius for decades, it just takes a keen eye….

Disclosure (“none” means no position):
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2009: Fear and Loathing $$

Post author By ToddSullivan
Post date December 23, 2008
6 Comments on 2009: Fear and Loathing $$

2009 is shaping up to make 2008 look like the good ‘ole days…

Why?

Let’s look at some issues…

STIMULUS: Won’t it make a difference?
No. government stimulus is great in that is provides a nice immediate effect. It has a tremendous long term cost though. For the gov’t to hire it must either take from others (more taxes) or just print money itself. Neither is a good option long term. It gives us all a warm fuzzy in thinking that Barack is taking care of all of us but gov’t jobs are never the answer. It is a credit card mentality from the gov’t. It only works until the bill comes due….stimulating the private sector to create jobs is a far better option. It take a bit longer to work, but the results, far from costing money provide it for all…

Let’s reverse the whole scenario. What out there points to a recovery? A million jobs paving roads? Really? If the employment rate is expected to be 10% next year, then any jobs created by the gov’t will be more than offset by losses in the private sector.

To use the credit card mentality again, the govt’t will use its credit card to create demand (jobs) while at the same time losing income (from other job losses). Can you imagine how this scenario ends well? Me either..

HOUSING: A rebound?
Hell no!! Housing still has tremendous downside. Why? Housing inventory is still at 12 months and will only grow. The option arm nightmare is just beginning. These people cannot be helped by lower interest rates as they are not paying the minimum interest payment now on the loans. This is going to lead to another tidal wave of homes coming onto the market in the next year or two. Unlike the subprime defaults, these defaults will hit the $500k and over homes that people bought with 5% or less down. The already squeezed middle class is going to get whacked again…

A scenario in which we see 14 or 15 months of inventory out there is not all that out of the realm of probability

Much has been said about the banks not lending the TARP money. They aren’t because they know they have hundred of billions of dollars of losses coming up in mortgage products from these loans coming up. They’ll need the cash.

20% down..
The last two years of the housing boom were fueled by new mortgage products that allowed buyers to put in most cases less than 10% down for a home. These loans are gone. We are back to the 20% down rule. Were is it coming from? Investments? With the Dow (.DJI) and S&P (.INX) off 40% this year the stock market will not be a source of funds. Jobs? Unemployment will most likely hit 10% next year so it will not be from jobs or singing bonuses and people worried about losing a job are not going to tap savings for a new home. In short there is not a source of funds for a down-payment.

Even if we have willing buyers, were are they going to get the money?

After the last housing bust in the early 1990’s it took 9 years for home prices to return to pre-bust levels. The boom then was nothing like the current one so to expect prices to return and make millions of underwater home owners profitable when they sell anytime before 2017 is delusional.

INFLATION: Up ,Up and Away
What happens when the supply of something grows unrestrained? It value falls. Thus is the dollar. As it s value falls, more of them are required to purchase items. Inflations ensues. How do we stop inflation? Raise interest rates to increase demand for dollars, oops, there goes the housing fix currently being tried…

THE CONSUMER:
Retrenching……If you have watched the news in the past month shopper after shopper is saying they are cutting back on spending and not using credit. That is the right decision for them, but bad for growth today. The consumer is shell shocked and will not dip their toes in the water again until they are 100% sure it is safe. That, will be a while. A poor economic climate in 2009 will only worsen the mood and the fear they feel, causing further retrenchment.

Part of this problem is the inevitable mood swing surrounding a new administration. This does have a severe downside though. “Hope” was Obama’s message and the “it is a new day” mantra has been restated over and over by followers. Here is the problem, even if Obama does everything right, 2009 will still be a lousy year. That optimism will turn to a vicious pessimism as consumers will then resort to a “if he can’t help us no one can” mentality.

The consumer will stash money away, reduce debt and live less frivolously. Again, all good things long term but very bad short term for business.

What to buy?
Personally if you are going into stocks, buy things people have to have with a nice dividend. Discretionary names ought to suffer as a whole with some individual spectacular successes.

Personally I am looking at oil (DBO), (DXO), shorting the dollar (UDN) and gold (GLD).

Not thinking about selling current holding as ones like Dow Chemical (DOW), GE (GE), Phillip Morris International (PM) all will pay me 9%, 7% and 6% in dividends this year (long term holdings so lower tax rate than regular income). Those that don’t are smaller portions of holdings and success there ought to be met with very nice upside (hopefully).

AutoNation (AN)is capturing market share by the boat load as competitors close. It will emerge as the clear dominant player in all its market. That, and I am still convinced something is going to happen with it, Sears Holdings (SHLD) and AutoZone (AZO).

Borders (BGP) is feast or famine. I think it will be fine but it will take time…CEO George Jones is doing everything right and Ackman will buy it before he let’s it fold.

On the fence for a sell is Wells Fargo (WFC). It is a tough one because there are only really four big banks left (JP Morgan (JPM, Bank of America (BAC), Wells and Citigroup (C) so business will be there. But, the level of business going forward just will not be there as housing suffers for years. I have been selling covered calls on it for three months now and have lowered my cost basis on it 10%. After January expiration, assuming a market rally going into inauguration, I may just take that chance to get out before the 2009 slide begins. If I am called out, my total return in it for the three months will be 12% (dividend included). I’ll take it.

Disclosure (“none” means no position):
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Selling Altria…..It’s Been Great..

Post author By ToddSullivan
Post date December 16, 2008
3 Comments on Selling Altria…..It’s Been Great..

No, it has nothing to do with any “moral objection” to selling cigarettes. I fear the legal landscape is bout to change in a very negative way..

First, Altria said yesterday:

In a 5-4 decision, the Supreme Court today ruled that a lawsuit involving “lights” cigarettes brought under the Maine Unfair Trade Practices Act was not barred by federal law.

“While we had hoped for a dismissal based upon federal preemption, it is important to note that the Supreme Court made no finding of liability. We continue to view these cases as manageable, and the company will assert many of the strong defenses used successfully in the past to defend against this very type of case,” said Murray Garnick, Altria Client Services senior vice president and associate general counsel, speaking on behalf of Philip Morris USA.

The Court said that the plaintiffs “still must prove that [the companies’] use of ‘lights’ and ‘lowered tar’ descriptors in fact violated the state deceptive practices statute.”

Today’s decision came in Altria Group, Inc. v. Good.

The decision is a horrible one in that it now opens all businesses to suits that would have ordinarily been funneled to Federal Court to State Court where we all know nothing good can happen. At a time when the US is fighting to house its share of international business, increasing litigation costs is not the way to go. But, that is for another post.

Altria. It has been a wonderful investment bought back in 2000 for a now adjusted $4 a share it has produced shares of Kraft (KFT), sold, and Phillip Morris International (PM), still held. It has also produce thousands of dollars in dividends over the years. I will hold PMI as it yields 5%, has great growth prospects and little ligation risk.

But, I fear things are going to take a turn for the worse here domestically and with already owning shares of the international tobacco operations, it is time to exit. Will the upcoming purchase is UST (UST) help earnings? Yes. Will it offset the upcoming deluge of lawsuits against the company? Not so sure. Having Tom Daschle at HHS is also a bad omen. Whatever grand plans he has for universal health care will undoubtedly be funded in part on the back of cigarette companies through litigation or its customers through oppressive taxes.

The irony of the tax argument is that it is a “negative” not “progressive” tax. We know the less education a person has, the more likely they are to smoke. We also know that those with less education tend to be lower income earners. It this case, raising taxes to these addicts decreases their disposable income to fund grand ideas of health care for all. Nice…”soak the poor”

This is also a result of better opportunities for the funds. Do I think the price of Altria (MO) will double in the next 12-18 months? No. I have a high degree of confidence the price of oil will though. I am buying that through the DBO (DBO) and DXO (DXO) ETF’s.

Disclosure (“none” means no position):Long PM, DBO, DXO, none
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Phillip Morris Issues $1.25 Billion in Notes

Post author By ToddSullivan
Post date November 17, 2008
2 Comments on Phillip Morris Issues $1.25 Billion in Notes

What credit crunch?

From Phillip Morris International’s (PM) SEC Filing:

On November 17, 2008, Philip Morris International Inc. (the “Company”) issued $1,250,000,000 aggregate principal amount of its 6.875% Notes due 2014 (the “Notes”). The Notes were issued pursuant to an Indenture (the “Indenture”), dated as of April 25, 2008, by and between the Company and HSBC Bank USA, National Association, as trustee (the “Trustee”).

In connection with the issuance of the Notes, on November 12, 2008, the Company entered into a Terms Agreement (the “Terms Agreement”) with Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Goldman, Sachs & Co., as representatives of the several underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to issue and sell the Notes to the Underwriters. The provisions of an Underwriting Agreement, dated as of April 25, 2008 (the “Underwriting Agreement”), are incorporated by reference in the Terms Agreement.

The Company has filed with the Securities and Exchange Commission a Prospectus, dated April 25, 2008, and a Prospectus Supplement (the “Prospectus Supplement”), dated November 12, 2008 (Registration No. 333-150449), in connection with the public offering of the Notes.

The Notes are subject to certain customary covenants, including limitations on the Company’s ability, with significant exceptions, to incur debt secured by liens and engage in sale and leaseback transactions. The Company may redeem all, but not part, of the Notes upon the occurrence of specified tax events as described in the Prospectus Supplement.

Interest on the Notes is payable semiannually on March 17 and September 17, commencing March 17, 2009, to holders of record on the preceding March 2 or September 2, as the case may be. Interest on the Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. The Notes will mature on March 17, 2014.

The Notes will be the Company’s senior unsecured obligations and will rank equally in right of payment with all of the Company’s existing and future senior unsecured indebtedness.

For a complete description of the terms and conditions of the Underwriting Agreement, the Terms Agreement and the Notes, please refer to such agreements and the form of Notes, each of which is incorporated herein by reference and attached to this report as Exhibits 1.1, 1.2 and 4.1, respectively.

The big deal here is the rate, 6.8%. In this environment that is fantastic. It also speaks volumes about the balance sheet of the company. Bigger still is the fact the notes are unsecured.

Disclosure (“none” means no position):Long PM
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Phillip Morris International EPS Grows 23%

Post author By ToddSullivan
Post date October 22, 2008

If I told you you could buy a business that had a 5.4% dividend yield, was growing earnings 20% a year, buying back billions in stock for only 13 times earnings..you would???? I also promise not to use anymore smoking related adjective to describe results like “on fire”, “smoking”, “lights up” etc…

Phillip Morris International (PM) Reported today:

Highlights
* Diluted earnings per share of $1.01, up 23.2% from $0.82, including the items detailed on Schedule 7
* Adjusted diluted earnings per share of $0.93, up 19.2% from the 2007 pro-forma adjusted earnings per share of $0.78
* Reaffirms its forecast for 2008 adjusted full-year diluted earnings per share, projecting growth of approximately 19% to 21% to a range of $3.32 to $3.38 from a 2007 pro-forma adjusted base of $2.79
* Increased its regular quarterly dividend during the quarter to $0.54, up 17.4% from its inaugural regular quarterly dividend of $0.46
* Spent $2.4 billion to repurchase 44.8 million shares of its common stock in the quarter
* Completed its previously announced acquisition of Rothmans Inc.

Philip Morris International Inc. (PM) today announced diluted earnings per share of $1.01 in the third-quarter of 2008, up 23.2% from $0.82, including the items detailed on Schedule 7.

“Our excellent third-quarter results clearly underscore our ability to deliver against our financial targets despite anticipated currency headwinds and the current global economic turbulence,” said Louis Camilleri, Chairman and Chief Executive Officer.

“We continue to witness robust business momentum, demonstrated by a strong increase in organic volume and solid net revenue and income growth, all of which lead us to reaffirm our annual earnings guidance”.

Dividends and Share Repurchase Program

PMI increased its regular quarterly dividend during the third quarter of 2008 to $0.54, up 17.4% from its inaugural regular quarterly dividend of $0.46. The increased dividend represents an annualized rate of $2.16 per common share. PMI has a dividend policy that anticipates a payout ratio of approximately 65%.

During the third quarter, PMI spent $2.4 billion to repurchase 44.8 million shares of its common stock. Since May 2008, when PMI began its previously-announced $13 billion, two-year share repurchase program, the company has spent a total of $4.5 billion to repurchase 86.2 million shares.

2008 Full-Year Forecast

PMI reaffirms its forecast for adjusted diluted earnings per share, reflecting strong business momentum, to a range of $3.32 to $3.38 for the full-year 2008, representing a growth rate of approximately 19% to 21%, from a revised pro-forma adjusted base of $2.79 per share in 2007.

Shares have fallen during the current panic 25% to $40 a share and represent a stunning buying opportunity..stunning…

Analysts on average had forecast 89 cents, according to Reuters Estimates. Sales, excluding excise taxes, rose 17.5 percent to $7 billion, helped by price increases and the weaker dollar. Analysts were expecting $6.6 billion. The number of cigarettes the company shipped also rose 4 percent to 225.9 billion.

Disclosure (“none” means no position):Long PM
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Buying GE…

Post author By ToddSullivan
Post date September 26, 2008

Safe 5% yield and 10 times earnings….picked up some for $24.77 a share Friday morning.

I first got real interested in GE (GE) last week when shares hit $23 and change but did not pull the trigger.

Yesterday, GE lowered guidance for the quarter and the year. Not real surprising given conditions out there but two questions I has were answered. Was the dividend safe, and was their ‘AAA’ rating safe. The answer to both was yes.

Why does ‘AAA’ matter? Consider there are only 6 companies that carry that rating, Automatic Data Processing (ADP), Berkshire Hathaway (BRK), GE (GE), Johnson & Johnson (JNJ), Exxon (XOM), and Toyota (TM). It simply means safety and low cost of capital. In these times, with the inevitable credit contraction with us for years, a ‘AAA’ rating will take on more importance.

The dividend. I like high, safe dividends. I currently hold Altria (MO) at 6%, Phillip Morris International (PM) at 4%, Dow Chemical (DOW) at 5%, Wells Fargo (WFC) at 4% dividend yields. Now we’ll ad GE at 5%. All of the above had dividends that, were they to be forced to be cut, simply would mean economic conditions have deteriorated to the point that the actual dividend cut would be the least of all our worries.

Watch the following video from Thursday. Please ignore CNBC’s Melissa Francis saying GE Capital was a “buy to sell” model. It isn’t (that has been discussed here on this blog before as a reason to maybe buy GE shares). It is a “buy to hold” and Immelt corrects her…how could she get that wrong? She just interviewed her boss and had the business model for the company’s main profit driver wrong….I bet it will come up at review time. Anyway, the video.

Here is an interview with Charlie Rose from March:
I think it is safe to say Immelt as GE (along with virtually every economist and other business leader) underestimated to the scope of the current crisis. That being said, I can’t single him out as “being wrong” about the future. But, if we look at the various businesses, one must be encouraged. GE is global in scope and will benefit from global growth. It’s financial services, being hit hard by the crisis, still maintain ‘AAA’ ratings despite the turmoil. That means very attractive opportunities will arise for GE that other lenders will not get, or be able to fund.

Now, the Immlet bashers will point to thew stock being near $60 a share in 2000 (yielding less than 1%) and want his head for its fall. But, GE made $1.27 a share that year. So, if you paid 47 times those earnings in 2000, Immelt is not the problem, you are. Paying 47 times earnings for a conglomerate the size of GE, is well ,for lack of a better word, just moronic. But, 10 times earnings with a 5% yield?

Essentially a bet on GE at this time is a bet on the global growth story, at a very good price, and a 5% yield. It may take some time to pan out, but i think it will, handsomely.

Disclosure (“none” means no position):Long GE,MO,PM,WFC,DOW
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Phillip Morris Completes Acquisition

Post author By ToddSullivan
Post date September 17, 2008

Phillip Morris International (PM) has closed the acquisition of Canadian cigarette maker Rothmans Inc. after receiving Canadian Gov’t approval.

Philip Morris said owners of about 47 million shares or 68% of the company, had accepted its offer of 30 Canadian dollars (about $28.16) per share. It will pay for those shares on Friday. They extended their offer by 10 days to allow shareholders to tender remaining shares.

This follows an industry trend of consolidation. Altria (MO) said earlier this month that it would buy smokeless tobacco maker UST (UST). And in January, Imperial Tobacco (IMT) bought Franco-Spanish company Altadis.There is much speculation about a possible eventual buyout of Lorillard (LO), which was spun off from the Loews (L) recently.

In Q2, PM started production of Marlboro cigarettes at two factories in China and have a partnership with the state-owned China National Tobacco, the only tobacco company in the world larger than Philip Morris International itself.

Rothmans owns 60% of Rothmans, Benson & Hedges Inc., which makes and sells cigarettes including Benson & Hedges, Craven A and Mark Ten. Philip Morris owns the remaining 40%.

PM pays 4% dividend and is growing earnings 15% to 20% in a market it has just begun to enter full force. this is one of those “buy it and put it away” investments.

Disclosure (“none” means no position):Long PM, Mo, none
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Phillip Morris International Ups Dividend 17%

Post author By ToddSullivan
Post date August 29, 2008

The current yield at the new level is 4%

The Board of Directors of Philip Morris International Inc. (PM) today increased the company’s regular quarterly dividend by 17.4%, to an annualized rate of $2.16 per common share.

The new quarterly dividend of $0.54 per common share, up from $0.46 per common share, is payable on October 10, 2008, to stockholders of record as of September 15, 2008. The ex-dividend date is September 11, 2008.

This is a rock solid yield on a company growing earnings in the mid-teens. As close to a no-brainer as you can get..

Disclosure (“none” means no position):Long PM
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Paulson & Co Files 13F: Adds Phillip Morris, Bank of America

Post author By ToddSullivan
Post date August 13, 2008

John Paulson, otherwise know as “the guy who made over $3 billion shorting mortgages” has files a 13F in his hedge fund Paulson & Co.

Notable moves:
Added 7 million shares of Phillip Morris International (PM)
Added 2.7 Million shares of Bank of America (BAC)
Increased NYMEX Holdings (NMX) ownership from 1 million to 2.5 million shares
Added 3.4 million shares of Wrigley (WWY)
Sold 4.5 million shares of Altria (MO)

What is interesting is the purchase of Bank of America. Paulson, who it can be argued saw the current housing and mortgage market mess before anyone, must see some light at the end of the tunnel. Either that, or he thinks BAC’s valuation is so low, he is protected from more bad news.

Either way, it does bode well as a glimmer of hope….

Full August filing

Full May filing

Disclosure (“none” means no position):Lonh PM,MO, none

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Phillip Morris Buys Canadian Cigarette Producer

Post author By ToddSullivan
Post date July 31, 2008

Philip Morris International(PM) announced today that the company has entered into an agreement with Rothmans Inc. (Rothmans) to purchase, by way of a tender offer, all of the outstanding common shares of Rothmans. The agreement and related offer have the unanimous support of the Board of Directors of Rothmans.

Rothmans’ sole holding is a 60% interest in Rothmans, Benson & Hedges Inc. (RBH). The remaining 40% interest in RBH is currently owned by PMI and, as a result of this transaction, RBH will become wholly owned by PMI. PMI and Rothmans have been joint shareholders of RBH since 1986.

PMI agreed to make the offer following Rothmans’ and RBH’s finalization of the CAD $550 million settlement, announced today in a separate release issued by Rothmans, with the Government of Canada and all ten provinces. The settlement resolves the Royal Canadian Mounted Police’s investigation relating to products exported from Canada by RBH during the 1989-1996 period.

Read full agreement here:

So, how will it affect earnings?
As a result of the finalization of the settlement described above, PMI has revised its second quarter 2008 results that were set forth in PMI’s earnings press release issued and furnished to the SEC on Form 8-K (Item 2.02) on July 23, 2008. The revision will record an after-tax, non-cash charge of $124 million. The charge, which will be included in the operating results of the Latin America segment, represents the present value of PMI’s 40% equity interest in RBH’s portion of the settlement (CAD $350 million) and will reduce PMI’s reported second quarter net earnings by $124 million to $1.7 billion. Diluted and basic earnings per share will be revised from $0.86 to $0.80 and from $0.87 to $0.81, respectively, as per the schedules attached to the press release.

PMI anticipates that the transaction will not affect 2008 full-year results and will be modestly accretive to earnings per share in 2009.

Consequently, PMI reaffirms its forecast for 2008 adjusted full-year diluted earnings per share, previously announced on July 23, 2008, projecting growth of approximately 19% to 21% to a range of $3.32 to $3.38 from a 2007 pro-forma adjusted base of $2.79.

what is nice is that a litigation free asset is being purchased that will add to earnings next year and further expands the market. It is really hard to fins something not to like here.

Full PM Filing

Disclosure (“none” means no position):Long PM

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Phillip Morris International on Fire

Post author By ToddSullivan
Post date July 24, 2008
1 Comment on Phillip Morris International on Fire

Well Q1 as an independent company is in the books for Phillip Morris International (PM) and of to a great start we are.

On Wednesday, Philip Morris reported double-digit sales and profits increases in the second quarter, boosted by higher prices and the weaker dollar.

Philip Morris shipped 223.2 billion cigarettes in Q2, up 1.0% from a year earlier. For the year, Philip Morris forecast earnings of $3.32 to $3.38 a share, up from its previous forecast of $3.18 to $3.24. This represents a growth of about 19% to 21% from a 2007 pro-forma adjusted base of $2.79 per share. Analysts had expected the company to earn $3.25 per share.

The company has just started to return cash to shareholders in the form uf a multi-billion dollar share repurchase which will further support EPS. How much you ask? During Q2, Philip Morris repurchased 41.4 million common shares for $2.1 billion, which is a part of its two year $13 billion share repurchase program that began in May of this year.

PM also declared its inaugural regular quarterly dividend of 46 cents during the quarter, which represents an annualized rate of $1.84 per share and a dividend yield of 3.6%.

In the quarter, Philip Morris International said profits rose 20.0%, to $1.8 billion, or 86 cents per share, from $1.5 billion, or 70 cents per share, in the year-earlier quarter. Revenues jumped 20.1%, to $16.7 billion, up from $13.9 billion last year. The sales include excise taxes totaling $10.0 billion. Excluding those taxes, revenue rose 15.5%.

Sales in the Eastern Europe, Middle East and Africa segment jumped 19% with operating income climbing 28%. Europe, its largest market, saw a 15% increase in sales and a 20% profit increase. Latin America and Asia recorded earnings jumps of 44% and 22%, respectively.

Just buy this stock and look back at it in ten years….you’ll be very happy

Disclosure (“none” means no position):Long PM

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Phillip Morris (PM) Declares Dividend

Post author By ToddSullivan
Post date June 18, 2008

The Board of Directors of Philip Morris International Inc. (PM) today declared the company’s inaugural regular quarterly dividend of $0.46 per common share, payable on July 10, 2008, to stockholders of record as of June 30, 2008. The ex-dividend date is June 26, 2008.

“Combined with the $13.0 billion, two-year share repurchase program which began in May this year, our first regular dividend as an independent company reflects our strong commitment to rewarding our shareholders in a generous manner,” said Louis Camilleri, Chairman and Chief Executive Officer.

The dividend gives the stock at today’s prices a yield of roughly 3.8%

Read Release Here:

Disclosure (“none” means no position):Long P<

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GE May "Spin" Appliances Unit, Not Sell It……

Post author By ToddSullivan
Post date May 22, 2008

It is apparent that the potential bids GE (GE) has received for its appliance unit are far from what it expected..

With sales of $7.2 billion last year, GE had hoped to get $6 to $8 billion for the unit. The fact they have now decided to consider a spin, an option not originally specified, can only mean conversations with potential buyers have resulted in prices much below that.

In an spin scenario, if it is a tax free exchange like the ones Altria (MO) has done with Kraft (KFT) and Phillip Morris International (PM), GE receives nothing in the exchange. It is shareholders who receive proceeds. They could opt to retain a percentage of the business and profit from its future growth that way if they opted. Perhaps they would spin 50% of it and retain the other half to sell at a later date when the market for it improves. This option may just be a move to pacify shareholders who have been frustrated for the better part of the decade.

No matter what they do, it is clear this is not unfolding as they expected. Immelt is out stumping the “brand” as if to remind potential buyers the value of having GE on an appliance. I am not sure this is in doubt in the appliance world.

The problem is buyers know he has to do something because he has already stuck his neck out and had it swiped at. He is also trying to sell into a very weak market. Add those two together and you have a seller who has a problem.

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Phillip Morris Int. Tender Offer: Just How Dumb Does TRC Capital Think We Are??!!!??

Post author By ToddSullivan
Post date May 2, 2008
5 Comments on Phillip Morris Int. Tender Offer: Just How Dumb Does TRC Capital Think We Are??!!!??

I had to read this three times before I could actually believe these clown are serious. You will find the man who made the offer’s contact info at the end.

Philip Morris International (PM) has been notified of an unsolicited “mini-tender offer” by TRC Capital Corporation to purchase up to 2.0 million shares, or approximately 0.09%, of Philip Morris International stock for $49.25 per share.

OK. Let’s just assume that is not a 3.2% DISCOUNT to the price I could sell it in the market today. Let’s also assume we are not looking at 15% to 20% EPS growth in the future. Let’s also forget that there is no multi-billion dollar buyback being exercised by the company as I write. While we are at it, we should also ignore that it is a market leader (and growing) on a massive international stage. Of course we also need to eliminate the fact based on current EPS the stocks trades at 15 times earnings which essentially is a discount to it growth rate.

What is maddening is just how stupid they think PM investors are? We have waited for years for this spin from Altria (MO) and now they actually think we are going to plop our shares over to them at a discount to current prices?

You may contact the man who made the offer, TRC Capital Corporation Lorne H. Albaum CEO (416) 304-1932 ext.223, and tell him yourself “I got your tender offer right here pal!”.

Here is a brief description of the company. The fact he made the offer means he thinks the price is going higher. He is just trying to take advantage of investor who may be confused by the “mini-offer” and think the company may be sold.

I spoke to Mr. Albaum Friday. He claims he is going to hold shares for a “long term investment”. He also said that shares tendered by the 29th would become his then and he would have “2 or 3 days” to actually pay for them. When I said, “well, if the price stays the same as it is today, you could essentially sell all of the 2 million shares (assuming he gets them all) the 29th and never pay a penny and pocket $2 to $3 million dollars”. After an awkward pause, he stammered, “that is a possibility”.

Or, he could sell 1/2 and then keep the other half after which he would have paid nothing for them. When I asked if he was going to keep all the shares he said “he would have to look at that depending how much capital was at risk”. Short answer? No.

He said the offer is made for people who own “10 to 12 shares and the offer may pocket them more money than paying a broker a commission to sell them”. Well, Etrade (ETFC) charges me $9.99 a trade and even at that, I come out ahead of Mr. Albaum’s price if I only had 10 shares. I asked him what other scenario’s there were and he said “numerous” but did not give any.

If you are contacted about this please ignore it.

Disclosure (“none” means no position):Long PM, MO, None

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