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Nine Reasons Philip Morris Is Smoking

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Despite the lackluster economy, Philip Morris continues to be healthy.

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Philip Morris International (PM) has been smoking. In spite of the lackluster world economy, the cost of cigarettes, and folks fretting about the reported health hazards, the legendary company continues to fare well as evidenced by its recent string of better-than-expected earnings and its perked-up share price.

But can the momentum keep going or is this baby about to get snuffed out? Here are some more of my thoughts on the company and the space ahead of the company's first-quarter conference call, which is scheduled for April 22.

1. I'm not a smoker and, to be honest, sometimes I can't even sit in a room with someone who is. But the simple fact is that lots of people are, and I'd argue that the surgeon general and health professionals are going to have a huge uphill battle if they think they're going to end it. As economies around the world recover, it would seem that a pack of smokes will only become more financially in reach for those inclined to buy them.

2. Longer term, if populations continue to grow, the company is very well-positioned to ring the register.

3. Regarding Philip Morris' first quarter, there's been chatter that the company could miss expectations. I wouldn't rule out a small miss. (Note that the estimate for the period is $0.93 a share.) But even if it did end up missing, I don't think it would be a disaster by any stretch.

4. If the stock were to dip post earnings, I think it could ultimately create a nice buying opportunity.

5. I don't think 13.2 times this year's estimate is too much to plunk down for a company that sells such a popular product and that has such promising earnings potential.

6. It's expected to post double-digit growth in EPS from this year to next. ($3.84 a share is the estimate for 2010 and $4.24 is the estimate for 2011.) It would be great if it achieved that type of growth, especially given the organization's size.

7. How can you ignore that dividend? The forward yield is around 4.5%.

8. My bullish macro outlook for smoking (that sounds odd) also has me smitten with British American Tobacco (BTI).

9. I get excited about companies that have bought back stock.

As a last though (and on the flip side), the current administration has been juiced by its recent health-care win. Might it try to do something to stymie tobacco? Would that impact the stock price?

Hey, have a great day!
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No positions in stocks mentioned.

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