It’s Boomer Time!

Phillip Morris International, Inc. (PM) is the largest tobacco company in the world (ex-China), with products sold in over 180 countries. While company headquarters remain in New York, PM has not operated in the US since it was spun off from Altria to pursue growth in emerging markets. In recent years, capital flows into ESG strategies have weighed on sentiment, putting downward pressure on tobacco company shares, even as PM accelerates its transition to Reduced Risk Products (RRPs). We believe the market underappreciates PM’s improving fundamentals and see a long runway of accelerating double-digit earnings growth fueled by IQOS, the market leader in heated tobacco systems. We expect more than $30 billion (about 20% of the market capitalization) to be returned to shareholders through dividends and share repurchases over the next three years. Should institutional investors decide to take PM out of the ESG penalty box as RRPs comprise a greater and greater share of total company profits, we’d expect a “smoke-free” Philip Morris to again trade at a premium valuation.

Click here or the image below to access an overview of our investment thesis which we recently presented at ValueX Vail.