What Do These Factors Say About Philip Morris?

 
on April 10 2013 9:50 AM

With shares of Philip Morris (NYSE:PM) trading around $94, is PM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Philip Morris, through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company’s portfolio of international and local brands include Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris, and Red & White. The company sells its products in approximately 180 countries in the North and South America, European Union, Eastern Europe, the Middle East, Africa, and Asia. The products provided by Philip Morris are a staple in many lives so look for the company to see profits well into the future.

T = Technicals on the Stock Chart are Strong

Since its initial public offering last year, Philip Morris stock has seen a very strong uptrend. In fact, the stock is now trading at all-time high prices and sees no signs of slowing. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Philip Morris is trading above its rising key averages which signal bullish price action in the near-term.

PM

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Philip Morris options may help determine if investors are bullish, neutral, or bearish.

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What does this mean? This means that investors or traders are buying a good amount of call and put options contracts, as compared to the last 30 and 90 trading days.

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As of today, there is an average demand from call buyers or sellers and average demand from put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a good amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Philip Morris’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Philip Morris look like and more importantly, how did the markets like these numbers?

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Philip Morris has mostly seen increasing earnings and revenue over the last four quarters. From these figures, the markets have been mixed about Philip Morris’s last four earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Philip Morris stock done relative to its peers, British American Tobacco (NYSE:BTI), Reynolds American (NYSE:RAI), Altria Group (NYSE:MO), and sector?

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Philip Morris has been a relative performance leader, year-to-date. Conclusion Philip Morris provides products that many consumers across the globe enjoy and some see as a staple in their daily lives. The stock has done well for investors as it is now trading near all-time highs. Earnings and revenue figures have seen modest growth overall. Relative to its peers and sector, Philip Morris has been a leading stock. Look for Philip Morris to continue to OUTPERFORM.

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