Nomura Holdings Bullish on Two Stock Giants: Walt Disney Co (DIS), Philip Morris International Inc. (PM)

Analysts from Nomura Holdings recently weighed in on entertainment giant Walt Disney Co (NYSE:DIS) and cigarette giant Philip Morris International Inc(NYSE:PM). The analysts reflect on Walt Disney’s recent 10-K filing and Philip Morris’ improved industry dynamics.

Walt Disney Co

Analyst Anthony Diclemente of Nomura Holdings recently weighed in on Disney after the company released its FY15 10-K highlighting its key elements of fundamental growth. A recent study by Nielsen, a media and marketing research firm, found that Disney’s parent company ESPN has lost 3 million subscribers since last year. Despite this decrease, the company’s affiliate revenue displayed continued growth, specifically through overall rate increases, and DiClemente states that the company’s contracts with distributors “appropriately balance those increases with minimum subscriber requirements.” The analyst believes that the 3 million subscriber loss could be a result of an increase in “skinny packages”, as the “industry-wide video subscriber declines have been more modest”. The analyst also notes Nielsen’s estimates did not include sub gains from online video subscribers such as Sling TV.

The 10-K also reported “continued growth across all Disney’s segments” such as their Parks and Resorts segment which grew in occupancy rates, per capita guest spending, and attendance. Specifically, domestic per capita spending and attendance increased relative to international figures, although these also displayed growth following 2 years of declines. Disney plans to “expend parks domestically to include Star Wars and Toy Story IP” and to open Shanghai Park in the spring of 2016. The report also highlighted growth in Consumer Products and Studio Entertainment, “despite the tough Frozen compare”. The analyst reiterated his Buy rating and kept his $121 price target.

According to TipRanks’ statistics, analyst Anthony DiClemente has a 65% success rate recommending stocks with an average return of 10.3% per recommendation. Overall, out of the 15 analysts who have rated DIS in the past 3 months, 10 gave a Buy rating while 5 remain on the sidelines. The average 12-month price target for the stock is $121.23, marking a 7% upside from where shares last closed.

Anthony Diclemente Normura Holdings

Philip Morris International Inc.

Nomura Holdings analyst Owen Bennet weighed in on Philip Morris after citing improved industry dynamics and accelerated recommended retail price roll-out. Excluding Chine and the U.S, the analyst expects declines in revenue to narrow into FY16 after the company cited continuing momentum at its recent presentation. He also cites an improvement in trends for the company’s key markets as well as industry volume improving into FY15. Owen states that although he does not believe the RRP will be accretive until 2018, a year later than company guidance, he sees a decrease in near-term drag relative to his initial expectations as “PMI accelerates roll-out into additional markets.” The analyst also states that the company expects the RRP to be a long-term key growth driver. Bennet credits the company for this, although sites that RRP is on the lower side of PMI projections. He believes RRP “contributes around 100bp to our long-term organic profit growth estimate of 6.5%.”

Bennet notes that although he is bullish, he will remain skeptical before he sees improvements in certain areas of the company. The analyst upgraded PMI to Neutral and increased his price target to $88 from $80. He attributes his rating to positive industry dynamics and “less value destruction from RRP in the near term”. In order for him to keep his bullish outlook, Bennet states that he is waiting to see if Marlboro can maintain its encouraging share trends through 2016, as they have been enhanced by pipeline fill of the new Marlboro 2.0 roll-out. The analyst cites skewed figures in the company’s Asian markets. He expects more supportive long-term trends in some of these weaker markets, and anticipates “increased PMI momentum in these markets over the next couple of years.”

According to TipRanks, Owen Bennet has a 40% success rate recommending stocks with an average return of 3.9% per recommendation. As of this writing, out of the 2 analysts who have rated PM in the last 3 months, 1 gave a Buy while another remains on the sidelines. The average 12-month price target for the stock is $90, marking a 3% upside from where shares last closed.Owen Bennett Consensus


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