Despite their reputation as “sin stocks,” tobacco company stocks have historically enjoyed fairly broad popularity among investors. They are preferred by many investors because of their high profit margins, strong cash flow, and typically high dividends paid. This outsized interest helps explain why many analysts are bullish on the sector.
Mainstay of the tobacco industry philip morris international (New York Stock Exchange: Afternoon) This was the subject of a recent research note. The report concludes that it is a definite buy at current prices.
stay in the bullpen
The analyst behind this memo was Bonnie Herzog. goldman sachs. She shared an update on Philip Morris following the company's latest quarterly earnings release. In his note, Herzog maintained his buy recommendation and $118 per share price target. This suggests an appreciation of her 24% from current prices over the next 12 months.
The tobacco company had a strong performance in the first quarter of 2024. It recorded significant growth in revenue and profitability, exceeding analyst consensus estimates on both metrics. This was due in no small part to the strong performance of IQOS, a product that heats tobacco rather than burning it. Management is feeling clearly optimistic about the future as they have raised their targets for both sales and bottom line profits.
“Ultimately, we believe management's decision to raise guidance earlier this year was positive and signals that management has a good grasp of its business,” Herzog said. I wrote.
Transition from conventional
Philip Morris spent quite a bit of words in its earnings call about the growth of its smoke-free business (SFB), especially since such products now account for 39% of the company's revenue.
Philip Morris appears to be making a fairly smooth transition from being a traditional cigarette supplier to a product that is considered safer for the world and less harmful for users. After a period of weakness, the all-important free cash flow (FCF) figure is also trending upwards, meaning there is plenty of cash to pay for ever-increasing high-yield dividends. For those who don't mind owning controversial stocks, Philip Morris seems like a pretty good buy these days.
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Eric Volkman has no position in any stocks mentioned. The Motley Fool has a position in and recommends Goldman Sachs Group. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.
Philip Morris stock is trending up 24%, according to a Wall Street analyst Original article published by The Motley Fool
