Analyst Note| Philip Gorham, CFA, FRM |
Philip Morris International reported decent third-quarter results that were close to our forecasts on an organic basis. The underlying business appears to be robust, with the consumer so far hanging in there amid higher inflation. The stock, on the other hand, had a poor third quarter and underperformed the S&P 500 by around 4 percentage points, most likely due to the continuing strength of the U.S. dollar and rising interest rates, which have closed the gap between the dividend yields on consumer staples companies and the yields available on other asset classes. We are retaining our $103 fair value estimate and see two ways that long-term investors can outperform with this wide-moat business.