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

To: Rarebird who wrote (1359)	4/10/1998 3:26:00 AM
From: Ralph Bergmann	Read Replies (2) \| Respond to of 6439

Rarebird, do you think there is a chance that the final outcome will be less than the 368 billion dollar as it was proclaimed in the original settlement? Ralph

To: Rarebird who wrote (1359)	4/10/1998 10:48:00 AM
From: RWilson	Read Replies (1) \| Respond to of 6439

RW: Here are some estimates I'm working with which show ( I think ) how cheap MO is today: 1998: $3.24 1999: $3.63 5 Year Projected EPS Growth Rate: 15% Rarebird: Check your figures with Zacks. You are way high. $3.15 is mean for 1998--Adelman at Morgan Stanley is above $3.20 but advised me that he's too high. Excise taxes aren't in the figures yet.) $3.45-$3.55 is mean for 1999 PRE new excise taxes. I agree with your theoretical outlook and the "golden goose is too big to kill theory". However, I think you can't really point to a 15% 5 year growth rate in today's heated environment. (Goldman SAchs has MO's '98/'99 EPS growth at 9% and rsuming 12% after that.) This isn't the drug industry where 19-20% margins are neccessary to justify R&D. My point is simpy that using relative multiple to justify valuation is dangerous . (Everything is dirt cheap next to Pfizer and Gillette.) Even when relative was cheap in years past the absolute p/e discount to it's own growth is where the money was made. Today the shares are not that cheap relative to its wn earning power. And even with civil litigation protection and "certainty" this stock 'aint ever getting a full multiple . It's still a "sin" stock and will always trade at a discount accordingly. When relative argument prevails, I look at companies like First Data (FDC). There's a core 15% EPS grower trading at 18x in a market that pays twice that for consumer non-durables. No big dividend like MO but no where near the risk of being quasi-nationilized which is MO's threat today. As the Wall Street Jounal editorial (Tobacco Crack-up) said, we now know know what they are. It's a meatter of price. They lost their abilty to argue on princple when they opted for settlement. One question I have never gotten answered is : Why wasn't the legislative actions by Florida et al which stripped tobacco of their traditional defenses ever chalenged in court? Did they simply want to settle so bad that they ignored it ?? (Bible says in annual that they want;ed to get out of the "litigation" bisiness. Sorry. No way.) Sorry for length. Hope to provoke your response. ;)