Credit Suisse Raising Price Target On Philip Morris International (PM)

Credit Suisse is raising its price target on shares of Philip Morris International PM to $64 from $62, and still has an Outperform rating on shares. In a note to clients, Credit Suisse writes, "We raise our FY11e EPS forecast by 2.5% to $4.41 (from $4.31) consistent with management guidance and we see scope for upgrades as the year progresses. Accordingly, we lift our TP to $64 (from $62). Against a backdrop of many Staples names disappointing during this earning season, PMI delivered again thanks to its superior pricing power. Outperform. We were aware that 4Q was going to be another tough quarter below PMI's medium-term sales model. Japan & Ukraine accounted for ~70% of the 5% organic decline in 4Q and after factoring the trade loading in Mexico, the underlying rate of volume decline in 4Q would have been close to 2.5% organic volume decline in FY10, which is incidentally the rate of decline that management is guiding for 2011. But the conference call was particularly reassuring on the pricing outlook (price variance ex-Japan in 2011 ahead of 2010 across the board and >60% of the pricing embedded in management guidance had been already taken, while some price skirmishes in Europe look manageable). Coupled with $250m savings + $5bn buybacks, we see PM with enough ammunition to meet (or potentially exceed) its guidance of 10-12.5% EPS growth ex-FX (which incidentally bakes in a higher tax rate). Last, despite ugly headline volumes in Japan, exit rates and January trends are encouraging, so it may be a source of upside risk to our 2011 numbers." Shares of PM lost 37 cents yesterday to close at $59.17, a loss of 0.6%.