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Non-Tech : Philip Morris - A Stock For Wealth Or Poverty (MO) -- Ignore unavailable to you. Want to Upgrade?

To: Ralph Bergmann who wrote (4944)	10/28/1999 8:08:00 AM
From: Theo Karantsalis	Respond to of 6439

Hello Ralph. Litigation a drag for Philip Morrisby Guy Dixon - Wednesday, October 27, 1999At a time when the shares of some little-known startups are fetching enormous price multiples, one name-brand stock, Philip Morris Cos. Inc., is going for what some analysts consider a steal.The share price of the world's largest tobacco company has tumbled nearly 16 per cent in the past seven days, hitting a 52-week low Thursday at $23.62(U.S.),despite continually strong growth in a number of its business particularly its Kraft food subsidiary.It closed yesterday up 6 cents at $25.56 on the New York Stock Exchange.The most recent stock plunge came after the latest legal decision against U.S. tobacco in a Florida appeals court last week. Philip Morris stock is now so deeply depressed that its market value is roughly the same as the value of the company's Miller Brewing and Kraft units. In other words, Philip Morris shareholders are now getting the whole tobacco business for free. The company's stock is trading at just less than eight times the projected 12-month earnings per share -- a tiny ratio for such a large company. The average for the Standard & Poor's 500-stock index is more than 23 times forward earnings. A number of analysts believe this is a sure sign that the stock has been oversold. The selling has been driven by continuing legal action against U.S. tobacco companies. Yet, Wall Street analysts generally believe a major ruling against the tobacco producers is far from certain at this point."There is a tremendous misunderstanding on the part of investors with regard to what's going on," said Roy Burry, an analyst at Brown Brothers Harriman in New York. He currently has a "buy" recommendation for Philip Morris shares. Given the recent heavy selling, most analysts are a little sheepish in acknowledging their "buy" recommendation. At the least, they tend to qualify this by noting that many others also have "buy" positions on Philip Morris shares. Of the 12 industry analysts surveyed by First Call Corp./Thomson Financial, a Boston-based firm that tracks analysts' recommendations, five currently have a "strong buy" on Philip Morris, five have a slightly tempered "buy," one has a neutral "hold" recommendation and one analyst has a not-so-emphatic "weak sell" on the stock. The problem, some analysts argue, lies in the news of the tobacco trials. The legal action currently ranges from individual lawsuits and class-action suits against the tobacco makers to a federal civil suit and U.S. Food and Drug Administration regulations."This is a tremendously complex issue. I think there's no question there is a huge misconception as to just what are the liabilities the company faces and, should things go against them in the long run, when it may have to pay up," said Richard Joy, an analyst at Standard & Poor's Equity Group in New York.Some argue that because tobacco companies are fighting suits on so many legal fronts, investors have come to believe that the companies can't possibly win. Yet analysts are pinning their stock predictions on the belief that many of the separate cases have particular weaknesses. "What most analysts are looking to is beyond the trial level and [instead] to the appeal," said Daniel Peris, an analyst at Argus Research, who has a "buy" call on Philip Morris.At the appeals level, "federal courts throughout the country have rejected smoking litigation as the basis for a class-action suit. It's too complex, too individual.