Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Ralph Bergmann who wrote (2390)	9/24/1998 2:38:00 PM
From: Geoff	Read Replies (1) \| Respond to of 6439

Ralph, here's a rough brute force analysis of MO after legal woes go away. For 1997 MO's three major divisions pulled in the following profits: Tobacco - $4,236.19 million Food - $1,973.1 million Beer - $246.71 million Now, if you want an EPS for each division based on MO's 2.432 billion shares you get: Tobacco - $1.74/share Food - $0.81/share Beer - $0.10/share The average P/E of food companies is 26.1 (based on K, UL, CPB, AOT, CAG, HNZ and PG), while the average # share outstanding is 558 million. The average P/E of beer companies is 23.75 (based on BUD, and ACCOB), while the average # shares outstanding is 258.5 million. If we apply these average share amounts to MO's food and beer divisions we get an EPS of: Food - $3.53/share Beer - $0.95/share Let's say MO currently trades at 47. Well, if we took this assumed EPS for food, then MO's P/E would only be 13.31, which is well below the average P/E for food companies of 26.1. And for beer our P/E would be 49, a little on the high side. IMHO I would say that MO should really be trading at a multiple somewhere between the food and beer averages, around 24x or 25x earnings. This would put MO roughly well within the price range of $65/share. However, with higher margins in tobacco, we could easily see a higher price, it really depends on when the settlement kicks in, because the settlement will likely end this current price war, thus improve the bottom line. Conservatively though, with a state settlement announced, and agreed to, MO should be fairly valued at $65/share. hope this helps somewhat, if this makes sense, geoff