Philip Morris International

Philip Morris International (PM) is facing plenty of currency headwinds these days. From Philip Morris International's 2012 Second-Quarter Results:

Reported diluted earnings per share of $1.36, up by 0.7%, or by 8.1% excluding currency, versus $1.35 in 2011...

Let's take a step back. In 2008 Altria (MO) spun off Philip Morris International.

The stock has done just fine since then but, more importantly, so has the business itself.

In 2007, the last full year prior to the spin-off, Philip Morris International earned $ 6 billion. 

Five year later in 2011, the company earned roughly $ 8.6 billion.

That's 43 percent earnings growth. Not too bad.

Yet, because they've been doing some consistently smart buying back of their stock, it looks even better on a per share basis.

They've shrunk share count nearly 20% while mostly doing the buying when the shares were comfortably below intrinsic value. They've also been paying a very nice growing dividend and, of course, will likely continue to do so for a very long time.

As a result of this smart capital allocation, earnings should be more than $ 5.00 per share this year compared to the $ 2.86 per share they earned in 2007. 

So more like 75 percent growth on a per share basis.

Unfortunately, at its current price the prospects are far less attractive near-term and, as long as the stock price remains somewhat elevated, the buybacks will have a more modest impact on long-term per share value.

Adam

Long position in MO and PM. Nearly all of my shares of MO were purchased many years ago (at, of course, much lower than recent prices) and my PM shares are mostly the result of the spin-off. No intention to buy any additional shares near the current market price of either stock (nor sell any of the shares I own). Basically, for me at least, PM and MO are shares I intend to own for a very very long time and ideally "forever". One can only hope that these stocks will eventually go lower so more shares could be accumulated at a plain discount to value and so the buybacks will work more effectively.
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