Philip Morris (NYSE:PM) has delivered a slightly disappointing performance thus far in 2014, with the manufacturer of Marlboro cigarettes down around 1%. This doesn't compare favorably to the S&P 500, which is up over 2% year-to-date. However, Philip Morris was further behind the wider index and has bounced back from lows of $75.39 in early February to reach the current price of $86.34, which is roughly in the middle of its 52-week range of $75.28-$95.60. With this in mind, is now the right time to buy shares in Philip Morris?

Drilling down into the first quarter results from Philip Morris
The most recent quarterly update (first quarter, released on April 17) was roughly in-line with expectations and contained few surprises, with the company delivering resilient and encouraging numbers. Negative currency impact, however, continues to have a significant effect on earnings per share (EPS) figures. With it included, Philip Morris saw EPS fall by 7.8% when compared to the first quarter of 2013, while excluding it equated to a rise of 4.7% versus the same time period in 2013. This shows that a glance at EPS figures can be misleading, with the impact of currency clouding the real performance of the company during the period.

Furthermore, excluding currency impact from forecasts means adjusted EPS is set to be between 6% and 8% higher in 2014 than it was in 2013 (when it was $5.40). This is highly encouraging and shows that Philip Morris is, I believe, pursuing the right strategy through which to combat volume declines that are affecting the global tobacco industry. For instance, it is on course to achieve a productivity and cost savings target of $300 million this year, while the vast share buyback program continues apace – Philip Morris expects to spend $4 billion this year on the purchase of its own shares.

While both of these actions will do little to stimulate the top-line, they are a prudent response to the decline in cigarette volumes that continues to affect Philip Morris and its peers. For example, the company reported cigarette shipment volumes of 196 billion units for the quarter, which is down 4.4% versus the first quarter of 2013. Therefore, cost saving is a sensible response to this problem, while a share buyback is a useful means of the company utilizing its strong cash flow when shares continue to offer good value (more on that later).

Let's take a look at the first quarter performance of two of Philip Morris' peers
The first quarter was also encouraging for peers Altria (NYSE:MO) and Reynolds American (NYSE:RAI). While Reynolds American reported flat adjusted EPS numbers for the quarter (versus the first quarter of 2013), it reaffirmed guidance for the full-year where it expects adjusted EPS to improve by between 3.5% and 8.2% versus 2013. This is an impressive target and is backed up by continued strength from its key brands – for example growth brands Camel and Pall Mall increased their strong performance and increased their combined share of the market by 0.7% versus the first quarter of 2013, so that it now stands at 19.4%. Such strength allowed Reynolds to increase dividends per share by 6.3%, which equates to a forward annual yield of 4.7% and compares favorably to Philip Morris' forward yield of 4.4%.

Meanwhile, Altria's first quarter results saw a reaffirmation of adjusted forecast EPS numbers for the full-year, with the company on target to deliver bottom-line growth of between 6% and 9% compared to 2013. This growth rate is within the company's sights as a result of it anticipating an improved performance during the second half of the year due to factors such as lower fourth quarter costs in the smokeable products segment (because of end of quota buyout payments), as well as a substantially lower tax rate in the fourth quarter (because of the effect of Altria's debt tender offer in 2013). Furthermore, Altria expects to retain a dividend payout ratio target of 80%, which is highly encouraging for income-seeking investors, and means that shares currently trade on a forward dividend yield of 4.7%.

Strong performance plus an attractive valuation equals a 'buy'
Having delivered encouraging updates for the first quarter of the year, it is clear that Altria, Reynolds American and Philip Morris are implementing prudent policies with which to counter volume pressures that are a feature of the global tobacco market. With regards to the original question of if Philip Morris is a buy at these levels, the first quarter update provides evidence of the company's strong performance and resilience during a challenging period for the sector.

In addition, shares in Philip Morris also appear to offer good value for money at current levels. Their forward price to earnings (P/E) ratio of 15.2 compares favorably to the S&P 500's forward P/E of 15.8, while a forward dividend yield of 4.4% is roughly twice that of the S&P 500. Although shares have not made a great start to 2014, they seem to have the potential, in my view, to deliver strong performance through the rest of the year and, as such, they appear to be a 'buy' at current levels.

Robert Stephens has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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 Motley Fool has a disclosure policy.