Category Archives: Stock Market

Philip Morris International Inc (PMI) vs. Pepsi (PEP)

In times of market turmoil, large companies that sell popular consumer goods tend to have greater stability and more attractive defensive characteristics than those that are more cyclical. Philip Morris International (NYSE: PM) and PepsiCo (NASDAQ: PEP) do not sell the same thing, but they all combine an impressive global production and distribution network. To help them build world-renowned brands.

Health problems have plagued the tobacco industry, but this is a relatively new challenge for PepsiCo and other beverage and snack manufacturers. Despite this, both companies are struggling to adapt to new customer needs. Smart investors are studying two stocks to see if there are better options now. Below, we will look at some key indicators of Philip Morris and Pepsi to help you make the best choice.

Valuation and stock performance

Both Philip Morris and PepsiCo have struggled in the past year, but the beverage giant’s losses are even smaller. Pepsi fell by 4% since April 2017, while the tobacco giant fell 14%.

Based on these data, it is reasonable to assume that Philip Morris is now at a more attractive valuation. However, a closer look at recent and projected returns will lead to different conclusions. The forward-looking indicators show that Philip Morris has an advantage and the yield is 25 times higher than Pepsi’s 30+ level. However, recent changes in tax laws have made tracking profits suspicious, and in the future, the forward multiple of Philip Morris and Pepsi is about 17, which makes the valuation of the two stocks very similar to the recent performance.

Dividends

Consumer-grade stocks often have attractive dividends, and Philip Morris and Pepsi are no exception. However, Philip Morris is currently paying more, yielding more than 4.25%, while PepsiCo’s yield is less than 3%.

Gatorade, Tropicana, Naked Juice, Quaker Oats, Starbucks bottled coffee, and Pure Leaf tea behind a pack of Sabra hummus.

Despite the lower yields, beverage and snack experts have some advantages in tobacco production. Based on current projections for profit in 2018, PepsiCo will pay 55% to 60% of its expected revenue as dividends, which is a fairly sustainable interest rate. On the other hand, Philip Morris’ dividend payout is more than 80%. This limits the tobacco giant’s ability to increase dividends in the future. We have already seen the impact of this restriction, because PepsiCo announced plans to pay 15% dividends later this quarter, even though Philip Morris’s last dividend was only 3%. Those who appreciate the future potential will like Pepsi’s dividend prospects better than Philip Morris now.

Growth prospects and risks

Both Philip Morris and PepsiCo face enormous challenges because health advocates question the products produced by the two companies. Philip Morris responded by fully accepting traditional cigarette alternatives, claiming that its long-term expectation was to completely withdraw from the cigarette market and instead use its iQOS to heat products such as the tobacco system. Philip Morris is convinced that scientific analysis will support risk-reducing products that limit the negative impact on health while providing the experience that smokers will appreciate, and that early data from major markets like Japan show that consumers are willing to convert . Competitors are trying to catch up, but iQOS’s lead will be difficult to overcome.

Most investors do not believe that the health effects of sugar-sweetened beverages and snacks are as serious as smoking, but this has not prevented consumer advocates from calling for Pepsi to take measures to alleviate the trend of obesity and related diseases. This requires some Pepsi skills because consumers are not completely sure how far they are willing to go with the health name of the food and beverage category. Pepsi has been an innovator of healthy snacks, and has always been committed to providing beverages that appeal to a wider audience, surpassing its eponymous carbonated coke. Since the snack market share is much stronger than the beverage market share, the Frito-Lay segment may be a major growth opportunity for Pepsi in the future.

Currently, PepsiCo is the better choice between the two large consumer goods companies. With faster dividend growth, clearer growth prospects and similar valuations, the beverage maker has a path, and Philip Morris must work harder in the future.

Benefits of lobbying evident for small drugmaker

Hiding in a large number of Congressional budgets is a clause that supports the price Medicare pays for a few drugs. When the Trump administration vowed to reduce the cost of prescription drugs, taxpayers spend millions of dollars each time.

Legislators acted after a lobbying activity by a small Washington pharmaceutical company called Omeros. Its main product is a drug called Omidria, which was used by hospitals during cataract surgery and has recently lost its coveted Medicare reimbursement status. Individuals associated with the company have also strengthened their political contributions.

Congressman Kay McMurray Rogers, Republican of the House of Representatives in Washington, presented this question to R-Wis. Spokesman Paul Ryan, who provided a place for drug supply on the 2,232-page spending bill signed by President Donald Trump on Friday, the assistant said. This article will restore the drug’s overdue status to two years, making it more profitable for the hospital to continue using the drug.

Even if broader health care measures fail to cut budget bills, from legislation to stabilizing insurance premiums in the “Affordable Care Act” for millions of consumers, to drug industry support efforts to reduce recent changes Some medical insurance costs for pharmaceutical companies.

The non-partisan Congressional Budget Office estimates the price breakthrough for Omeros and takes into account the long-term impact. The three products of other companies will spend $26 million on taxpayers in 10 years.

Speaker Ryan and Congressman Michael Morris Rogers said that their behavior is to protect patients from acquiring innovative drugs.

Ryan spokeswoman Ash Lee Strong said: “This provision is the correct policy and has been approved by both Republicans and Democrats to write the bill and is included in the requirements of our conference members.” “Proposing any other reason is not only false It’s absurd and insulting.”

Nate Hodson, spokesperson for McMorris Rodgers, said that she is pushing this initiative “to provide safe, innovative, life-changing drugs for patients across the country.” Inject Omidria into the eye to prevent excessive contraction of the pupils during cataract surgery and reduce the afterwards pain. Cataract surgery is usually an outpatient procedure.

Omeros, a drug maker, did not make a preliminary response.

Some people think that the legislator’s behavior is out of touch.

Andrea Harris, an analyst at investment research firm Height Capital Markets, said: “When policy makers say they intend to reduce drug costs, this is a policy that goes against these talking points.” “This is an innovative drug that remains open.” Instead of putting downward pressure on drug prices.”

Making changes is the top priority for Omeros and its CEO, Gregory Demopulos.

Demopulos said in a recent press release on the company’s financial performance: “Our frustration is shared by doctors across the country and patients are still restricted from contacting Omidria after the expiration date on January 1.” “Parliament and administrative work are In the process, we look forward to resolving this issue as soon as possible.”

“Transfer” is the technical term for Omidria’s lost health insurance payment status. Pass-through allows Medicare to cover the full cost of the drug, not cataract surgery. This will motivate hospitals to use the drug instead of low-cost alternatives.

In the U.S. capital, Omeros promoted his case by providing lobbyists and campaign contributions to famous legislators from individuals associated with the company.

According to the disclosure disclosure records submitted to the House of Representatives and the Senate, Omeros spent more than $1 million in lobbying fees in 2017, up from $645,000 in the same period last year, because the company brought two new companies to Congress and the Trump administration. File a lawsuit.

The records show that one of the new companies, The Nickles Group, was paid $275,000 to lobby lawmakers to deal with issues related to medical insurance payment policies in hospital outpatient and outpatient surgery centers.

Omeros paid similar amounts to King & Spalding, which was hired in 2014, and asked the House to “reimburse outpatient drugs.”

Last December, R-Wash. The company’s Dave Reichert proposed legislation to solve this problem. Mike Morris Rogers is a co-founder.

Individuals related to this pharmaceutical company have increased their political contributions.

Open Secrets, the political funding website, revealed that Omeros CEO Demopulos donated $39,600 to the National Republican Congressional Committee of the Republican Party’s campaign in the 2018 election cycle.

The Federal Election Commission’s records show that Demopulos also donated $5,400 directly to the Ryan speaker’s campaign on August 31, 2017. Demopulos donated $5,000 to Ryan’s Prosperity Action Inc. on the same day.

Demopolus donated $1,500 to Reichert in 2016.

Another company that has benefited from changes in the budget bill has expressed some confusion about the inclusion of the clause.

Eli Lilly’s image agency Amyvid is one of the other three products that will regain their lost Medicare reimbursement status. Spokesman Scott McGregor said: “Lilly didn’t focus on the consolidated bill.”