PMI Posts Strong Q1 But Margins Suffer Temporary Setback

There were only minor variances from our estimates in Philip Morris International's, or PMI's, robust first-quarter results, and we are maintaining our $103 fair value estimate. The headline from the report was that volume in Eastern Europe declined less than we had feared, but with PMI planning to exit Russia this year, we retain our forecasts for the region which had assumed such a strategy. After the initial overreaction to the financial impact of events in Ukraine to PMI, we think the market has course corrected and the shares are now fairly valued.