Stanley Druckenmiller is one of the greatest investors of all time. As a manager at Duquesne Capital Management for nearly 30 years, from 1981 to 2010, he generated an average annual return of 30% and never had a loss year.
Druckenmiller also worked closely with George Soros, helping to “break the Bank of England” in 1992 through a huge short bet on the pound.
Although Mr. Druckenmiller recently retired as a hedge fund manager, he still manages his own funds through the Duquesne Family Office, making the billionaire’s move noteworthy. Druckenmiller recognized the potential for growth early on. Nvidia In the field of Artificial Intelligence (AI), he actively invested in stocks in Q4 2022 after ChatGPT was released, but recently he sold it too early and sold it all earlier this year. He admitted that he had released it.
However, Druckenmiller made another smart buy earlier this year, buying 889,355 shares. philip morris international (New York Stock Exchange: Afternoon) The call option gives you the right to purchase an additional 963,000 shares. cigarette inventory.
Mr. Druckenmiller opened a position in the stock in the second quarter, and while we don’t know exactly when he bought the stock, we do know that it’s been a big dividend stock move since then. Philip Morris is up 30% since the end of the second quarter, an impressive feat for a high-dividend stock, and the stock just soared after reporting its third-quarter results.
Before we discuss whether it makes sense to follow Druckenmiller into the stock, let’s take a look at these numbers and the current state of the business.
Image source: Getty Images.
Smoking is on the decline in many parts of the world, but Philip Morris has adapted to that reality better than its two closest stock market neighbors. Artoria and british american tobacco.
Currently, about 40% of the company’s revenue comes from products such as its IQOS device, which heats real cigarettes without burning them, and the popular oral nicotine pouch Zyn, which it acquired in its $16 billion acquisition of Swedish Match in 2022. This is due to the next generation of products. We are seeing growth in both of these categories as we add new factories to expand production of Zyn and roll out Iqos in the US.
That strength was on display in the company’s third-quarter earnings report, as Philip Morris beat analyst estimates and sent its stock up 10.5% on Wednesday.
The tobacco company reported organic revenue (excluding currency, divestitures and acquisitions) of revenue of $9.91 billion, an increase of 11.6%, beating expectations of $9.69 billion. Organic revenue from the Smoking Smoking business increased 16.8% to $3.8 billion, while organic revenue from the combustibles business increased 8.6% to $163.2 billion due to higher prices and a 1.3% increase in cigarette volume.
The oral smoking cessation business, which primarily consists of Zyn, continued to perform well, with shipments increasing 22.2% to 4.4 billion units.
This growth helped the company expand its margins, with organic operating income increasing 13.8% to $3.7 billion and adjusted earnings per share (EPS) increasing 14.4% to $1.91.
Finally, the company also raised its full-year guidance, raising adjusted EPS to $6.45 to $6.51, from the previous range of $6.33 to $6.45 and compared to the consensus of $6.41. On a currency-neutral basis, the company expects EPS to be between $6.85 and $6.91, up 14% to 15% from 2023.
Druckenmiller hasn’t explained why he bought the international tobacco distribution company, but recent results should provide some insight.
Philip Morris has performed flawlessly, delivering double-digit growth in a market where many believe decline is inevitable. While peers such as Altria and British American Tobacco have single-digit price-to-earnings ratios, Philip Morris is commanding a premium, trading at a 20x P/E ratio based on this year’s estimates.
Additionally, the dividend yield is 4.5%, and the company just raised its dividend by 3.8% to $1.35 per quarter. Given the underlying growth in the business, the company should have no problem increasing its dividend over the next few years.
With earnings growing in the mid-teens and Zyn and Iqos having a lot of open space, tobacco stocks continue to look like a smart buy.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends British American Tobacco and Philip Morris International and recommends the following options: A long January 2026 $40 call on British American Tobacco and a short January 2026 $40 put on British American Tobacco. The Motley Fool has Disclosure policy.
