Summary
Philip Morris’ core business is still very strong. The company has recorded strong revenue growth in some regions.
The balance sheet is burdened with heavy debt and Philip Morris’ dividend exceeds free cash flow. The company has a weak capital structure.
I rate Philip Morris as a solid hold. The shares are a good buy for dividend investors looking for income, but there doesn’t seem like there is much upside.
Background
Philip Morris (PM) is the world’s largest tobacco company. Since having started in 1847, the company has built an outstanding portfolio of some of the world’s most popular brands such as Marlboro, Chesterfield, Bond Street and Parliament. After having been pleasantly surprised by the strength of Altria’s business fundamentals, I decided to review how Philip Morris is performing on the international front.
Altria (NYSE:MO) spun-off Philip Morris in 2009 arguing PM would have more "freedom" outside the constraints of US corporate ownership in terms of potential litigation and legislative restrictions to "pursue sales growth in emerging markets." while Altria focused on the United States. The shareholders in Altria were given shares in PM, which were listed on the London Stock Exchange and other markets.
