Philip Morris Discloses $18 Billion Repurchase Program

Philip Morris International logo

–The latest buyback strategy of Philip Morris is intended to return more funds to the company’s shareholders.

–Solid Performance in Asian markets has led to the sales growth for the tobacco company, contributing to revenues boost in the last quarters.

–Investors have showed increasing interest in tobacco stocks thanks to beneficial share repurchase programs and dividend yields.

Last week, Philip Morris International announced its newest three-year share buyback strategy, equaling $18 billion, as the world’s leading tobacco group intends to provide more return funds to its shareholders.

Since PMI became a publicly traded company in March 2008 after its spin-off from parent company Altria Group, the tobacco giant spent roughly $23 billion to buy back 432 million shares. The manufacturer of L&M, Bond and Marlboro brands, which has already bought back $1.5 billion during the first quarter, intends to repurchase a total of $6 billion in the current year.

The newest buyback plan starts on August 1st. The current $2 billion repurchase strategy, which was started in May 2010, should be finished “ahead of schedule,” Philip Morris representative admitted.

More than solid performance in Asian region has helped to boost the sales of the company, and contributed to earnings growth in late quarters. Philip Morris was eager to accelerate growth in developing markets amid dropping volumes in mature markets across Western Europe. The tobacco giant is present on almost 80 markets of the world, excluding the USA and China.

Investors have recently been interested in tobacco stocks thanks to their solid cash inflow, share buyback programs and dividend yields. Three of four leading privately owned tobacco groups have managed to excel the Dow Jones Commercial Average this year, with Philip Morris reporting 10% in 2012.

Since becoming public at $50, the company’s shares have soared by 73%, outperforming the gains of its former parent company Altria, as well as Reynolds American Inc. and Lorillard Inc. posted during the identical period. Philip Morris, which reported a record high of $91.05 in May, has been lately up-trading by 1.7 percent to $86.46.

In its report on tobacco survey, Morgan Stanley, last week confirmed the bank’s $90 price target presumes Philip Morris retains growth in organic operating profit based on local currency between 6% to 8% within the mid term. The company adds the stock’s present valuation is attractive compared with premium rivals, including Colgate-Palmolive and Coca-Cola.

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