Ticker Shock: Three Reasons Why Phillip Morris is Smokin'

We were doing pretty well there on Wednesday until the last hour of the session, weren’t we? 

Anyone out there see this news? This is the definition of teamwork. Kidding, folks - just my mood today.

Asian stocks rose as we slumbered. The Hang Seng and the Nikkei were up 2.26% and 1.37%, respectively. However, Europe was a bit of a mixed bag earlier this morning. And here in the US, we're currently trading higher.

Here's what I’m focused on this morning:

Philip Morris (PM):
Shares of the well-known tobacco company are trading just a smidge higher after the open. Folks, this is an opportunity.  Yeah, the first-quarter earnings were pretty good, insofar as EPS came in at $0.74, a nickel better than expectations.

I was also pretty happy with the following comments in the release: “PMI reaffirms its forecast for 2009 full-year diluted earnings per share of $2.85 to $3.00.”

But there are 3 big reasons why I think it makes sense to get into this stock;

1. In spite of all the taxes, health issues, bad-mouthing and general abuse that smokers get thrown their way, I’m betting the average smoker will continue to belly up - and I think the smoking crowds outside your average office building will only increase as time passes. With worldwide population growth also expected, I'm confident I’ll be proven right.

2. The dividend is sweet as pie. The forward yield, by my calculation, is now a little better than 5.8%.

3. Its beaten expectations in the last 4 quarters. I like that momentum, and, when all is said and done, I’d rather place my chips on companies that are positively surprising the Street.

eBay (EBAY):
 Excluding items, the company known for its online auctions put up $0.39 a share in its first quarter. That was a nickel north of the estimate I’m seeing, and it seemed better than what the company had been expecting.

Note that in its fourth-quarter earnings release, it indicated that it was looking to post an adjusted profit of $0.32 to $0.34 a share in the period.

As far as the second quarter is concerned, excluding items, it’s looking for $0.34 to $0.36 - which seems to be smack dab in line with expectations. That’s good news.

While I think the company fares well over the long haul, I’d be very reluctant to climb aboard right now on the heels of this news, given the run the shares have already had since early March. (The stock is up more than 40% since March 9, when it closed at $10.27.)

If anything, I’d wait for a decent pullback before pulling any triggers. But again, this was a decent quarter.

For my previous take on eBay and the Skype news from earlier in the month, see the article: Skype Hype to Send eBay Soaring?