Home » tobacco sin stocks » Philip Morris International: Sizzling Sin Stock or Inevitable Puff of Smoke?

Sin StocksPhilip Morris International (PM) is the international brand spin-off from the Altria Group (MO), which owns US-based cigarette brands.

We at Sin Stocks Report have always been big fans of tobacco sin stocks, not because of the health problems they allegedly create or because of the stinky breath of chain smokers but rather because the company has a number of great brands serving markets that avidly smoke.

While North American regulations are becoming stricter about when and where smokers can smoke, the rising middle class in emerging markets (particularly in Asian markets) are lighting up like crazy and running to western-styled brands. Tobacco sin stock investors like the growing customer-base who are flush with money, they like the dividends that tobacco companies pay out, and they like competitive moat that larger companies have placed around them.

One writer from The Motley Fool includes Philip Morris International on their list of stocks to buy because of high operating profit margin and revenues of $11.2 billion in 2012.

But there is always another side to the coin and a writer with SeekingAlpha has some questions about Philip Morris in the long term. The writer asserts that Philip Morris is okay for the short term (in 2013 and 2014) but he points out a troubling trend in the amount of debt that the company is carrying, and he believes that it might end up being too much debt for the company to bear. He points out that at the end of 2012, Philip Morris had $5.2 billion of debt on its books but only $2.98 billion of cash and equivalents… and the amount of debt held by the company was rising each year.

So what is the outcome? In the short term, perhaps as long as a couple of years from now, the company should continue to rock and roll in the way investors have come to expect. But after that? Well hopefully its increased Asian market will be throwing enough money into the company to help it manage and pay down its debt. But something needs to happen soon because that trend is troubling.

The company itself is being conservative in its projections and anticipating a slow European recovery and lower sales in Japan and the Philippines. But overall, sales are up, profits are up, and dividends are up.


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