PM – Hard to Poke Holes in the Quarter

PM put up a solid print yesterday - here's what we liked

Constant currency organic revenue growth accelerated to 6.8% in the quarter versus a reasonably difficulty comparison (+8.2%) in the year ago.  Even better, we saw that top line strength leveraged into +12.3% currency-neutral operating income growth, an enviable result versus the balance of the consumer staples names that have reported thus far.  The company exceeded our volume estimate, posting volume growth of 2.7%, with strength in the Eastern Europe, Middle East and Africa region (+7.1%), as well as the Asia region (+5.7%)  – meaningful reacceleration of the volume momentum in both regions.

EPS exceed consensus by $0.02 in the quarter, but guided below consensus (range of $5.68 to $5.78) versus consensus of $5.79 (we are at $5.71, but still see some risk to that number as the yen continues its downward spiral.

We need to see consensus move down closer to our estimate (it should) given the company’s commentary yesterday in order for us to get more constructive on the name.  We prefer to have a positive bias on names with a clear path to EPS upside (CAG, for example).

Having said that, PM’s results in the quarter shame a number of other large cap staples names whose multiples exceed that of PM (in some cases by a 1 or 2 P/E turns).  If only PM shipped diapers instead of cigarettes…


Call with questions,




Robert  Campagnino

Managing Director




Matthew Hedrick

Senior Analyst

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