Will Philip Morris Keep Moving Higher in the Second Half?

With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Philip Morris International (NYSE: PM  ) . As we saw in our look at Philip Morris International earlier this month, the tobacco maker has benefited from its lack of U.S. exposure. With international regulation less strict than what its American counterparts face, Philip Morris has been able to push growth to the limit. But will that laxity continue? Let's take a quick look at Philip Morris International's prospects for the rest of the year and beyond.

Stats on Philip Morris International

Average Stock Price Target $91.38
2012 EPS Estimate $5.18
2013 EPS Estimate $5.75
Fiscal 2012 Sales Growth Estimate 1.9%
Fiscal 2013 Sales Growth Estimate 5.4%
CAPS Rating (out of 5) *****

Source: Yahoo! Finance.

Does Philip Morris International have any steam left?
Philip Morris has made a huge move, with its stock soaring about 50% since its lows from just last October. Investors are clearly drawn to a couple of the company's best features. First, just as American tobacco companies Altria (NYSE: MO  ) and Vector Group (NYSE: VGR  ) have paid substantial dividends throughout their existence, Philip Morris has made impressive payouts ever since its spinoff from Altria. Yet unlike those companies, Philip Morris doesn't have the same exposure to litigation in American courts, which many argue gives it less overall liability risk.

It may be surprising to discover that at current levels, Philip Morris now has twice the market cap of former parent Altria. Granted, Philip Morris also has about double the revenue of Altria, so the valuations aren't out of sync. In fact, with the exception of Lorillard (NYSE: LO  ) , Philip Morris carries a lower P/E ratio than its American counterparts, as well as international competitor British American Tobacco (NYSE: BTI  ) . Still, the stock's big rise raises questions about whether the share price adequately accounts for risk.

For now, the big headwind Philip Morris will face is the strong dollar. With much of its revenue coming from Europe, the weak euro will hamper earnings strength for the tobacco giant. Yet unless currency shifts become permanent, Philip Morris has relatively more pricing power than many multinational companies, which could help it weather the storm more effectively.

Philip Morris has come a long way very quickly, so I wouldn't be surprised to see it give up some of its gains. As a long-term pick, though, the company has a lot of promise, both from its dividends as well as its growth potential.

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Click here to add Philip Morris International to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter @DanCaplinger. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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