Is Too Much Happening All at Once at Philip Morris International?

When investors hear about management changes, reorganization, global market risks and a big analyst upgrade all at once, it’s enough to make their heads spin. That is what is going on right now at Philip Morris International Inc. (NYSE: PM), and some investors may view this is a contrast to Altria Group Inc. (NYSE: MO).

Philip Morris is reorganizing to shift its focus more toward the smoke-free products. The company will focus its geographic regions, with new management roles being named as it turns away from its reliance on global cigarette sales. The international tobacco giant had previously announced that its focus will move toward smoke-free products while cigarette volumes keep declining.

Amid the management change announced, finance chief Jacek Olczak is being appointed as chief operating officer and will be responsible for global strategy and will be expected to deliver on its both combustible and on reduced-risk products. He joined Philip Morris back in 1993 and was president of the European region from 2009 to 2012. Martin King will move from being president of the company’s Asia region to the new chief financial officer role.

In an effort to have more focus, the company will move its current operations of four geographic regions to a new measure of six geographic regions. The company’s regions in the European Union, Latin America and Canada will remain as is, but the Eastern Europe region will be taken away from the Middle East and Africa. Its other segments will include its East Asia and Australia region and also the South Asia and Southeast Asia region.

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Numerous other management changes were noted at Philip Morris. The chief executive officer, André Calantzopoulos, said of its focus:

There is no doubt that the greatest contribution PMI can make to society is to replace cigarettes with less harmful alternatives. The changes we are announcing today reflect our desire to best equip, empower and support our organization as we transform within a rapidly evolving environment. They reflect the exceptional quality and depth of our senior leadership and underscore our commitment to successfully deliver solutions not only for our consumers, employees and shareholders, but also to society in general.

As a reminder, Philip Morris International is seeking FDA approval for a the noncombustible device IQOS along with Altria. The companies hope they can market and sell IQOS under the Marlboro brand here in the United States, and Philip Morris hopes to market IQOS as a safer product than cigarettes.

Philip Morris International shares were already covered by Goldman Sachs with a Buy rating, but on Thursday the firm added the international cigarette giant to the prized Conviction Buy list. Its price target of $135 implied upside of about 21% from the prior $111.61 closing price. Then there is its 3.8% dividend yield to consider, so the total implied upside here would be just over 25% on a total return basis.

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As a reminder, at this stage of the bull market the current analyst upside on Buy and Outperform ratings is generally 8% to 15% for the equivalent of Dow Jones Industrial Average and S&P 500 Index stocks.

Philip Morris International’s 52-week trading range is $86.78 to $123.55, and its consensus analyst target price was $126.00 ahead of this call.

Shares of Altria, Philip Morris International’s former parent, were last seen down 0.3% at $64.19. The 52-week range is $60.01 to $77.79, and the consensus target price is $72.23. Altria comes with a 4.2% dividend yield, now that its shares have pulled back more than 17% from the 52-week high.

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