Philip Morris International IncPM

Morningstar Rating

Stock Research and Analysis

by Philip Gorham, CFA

Philip Morris International’s globally appealing brand portfolio, international scale of operations, and addictive products give it a wide economic moat, in our opinion. However, downtrading in some important Eastern European markets will provide a Read more

Bulls Say

With almost 16% of the non-U.S. market, Philip Morris is the world's second-largest cigarette manufacturer, behind only China National Tobacco, which has a near-monopoly on the Chinese market.

Philip Morris owns the international rights to Marlboro, the iconic global cigarette brand, and the strength of its product portfolio makes the firm the price leader in many international markets.

With its focus on premium products, the firm has benefited from the recent trend toward trading up in developing markets, and its operating margins of around 40% are higher than those of its peers'.

Despite having a presence in around 160 countries, Philip Morris still believes that it can grow in markets such as India and Vietnam both through population growth and by taking share from smaller competitors.

The firm has entered into joint ventures with China National Tobacco to market Marlboro in China, and with Swedish Match to market snus in the EU. Philip Morris would be well-positioned to exploit any lifting of trade restrictions in these markets. Read more

Bears Say

Philip Morris generates almost half of its revenue from Western Europe, a mature market in which cigarette consumption is declining as a result of higher prices and tighter regulation.

The global economic slowdown could halt or even reverse the recent consumption trend in developing markets toward premium, higher-margin products.

With its revenue derived in foreign currencies and some of its input costs in dollars, Philip Morris' financial performance can be hindered by a strengthening of the U.S. dollar.

Although Marlboro is currently being sold under license in China, we think it is unlikely that the state government will relinquish control of the Chinese tobacco industry in the foreseeable future, and we do not expect this potentially lucrative market to be opened up to foreign firms for many years.

Several governments have implemented excise tax increases on tobacco in recent months, so the illicit trade of cigarettes could increase at the expense of Philip Morris' volumes. Read more

Strategy

Philip Morris seeks to strengthen its brand portfolio and market positions through both internal growth and acquisitions. The firm supports key brands, particularly Marlboro, to balance market share Read more

Management

Following the spin-off in 2008, Louis C. Camilleri moved from chairman and CEO of Altria MO, where he had overseen the divestiture of the firm's nontobacco businesses, to lead Philip Morris International. We think his experience in the tobacco industry Read more

Profile

Philip Morris International is the world's second-largest tobacco company, behind only China National Tobacco, and holds almost 16% of the non-U.S. market. The firm owns Read more

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