Morgan Stanley Offers 33 Questions For Philip Morris Mgmt At Investor Day

Below are the questions:

1. "What are the key risks are to this year's outlook of 10-12 percent constant-currency EPS growth?"
2. "Given your ability to deliver 10+ percent underlying EPS growth during both 2015 and 2016 despite making significant investments in your RRP and conventional cigarette portfolio, do you see the potential for EPS growth — particularly assuming a positive inflection in iQOS profitability — to return sustainably to this 10–12 percent level?"
3. "From a longer-term standpoint, are you comfortable in the sustainability of 5–6 percent pricing (vs. the 6.4 percent long-term average) despite a gradual erosion in the affordability of cigarettes across many markets?"

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4. "Are you confident cigarette volumes can recover from -4.8 percent levels to ~3 percent during 2H15, and what markets do you see as the key sources of upside/downside risk?"
5. "What have been some of your most successful innovations during the past 12–24 months, and where are your investments/efforts focused going forward?"
6. "Given the recent outsized excise tax increase in Argentina and proposed large-scale increases in markets such as Indonesia, are you seeing any change?"
7. "How are mix trends progressing across EU, and what steps are you taking to mitigate the impact of down-trading in key markets?"
8. "Do you expect JT's focus on the Winston migration and potentially on Natural American Spirit to result in a sustained level of heightened competitive pressure going forward?"
9. "Do you still view Indonesia as a market that is likely to experience cyclical declines but also periods of healthy volume growth going forward?"
10. "From a market share perspective, could you elaborate on the competitive and price gap issues that have emerged during L6M, and what gives you confidence that these issues will be transitory?"
11. "Can you comment on recent market share trends for both the super-low price tier in the market, and your own share performance within this segment?"
12. "With industry volumes having returned to low double-digit decline in 1H16, has this slowdown simply been a reflection of more significant excise tax increases in 2016 or other macro factors (e.g., higher elasticity)?"
13. "Why do you think elasticity in Russia has ultimately been lower than expected, and given the incremental weakness in the economic environment are you optimistic that this trend can persist?"
14. "Can you provide an update on the current state of your business in targeted whitespace/early-stage emerging markets such as Vietnam and Bangladesh?"
15. "How far along is the implementation of the Marlboro brand architecture, and — following the accelerated investment during 2015 — which markets are still being targeted for roll-out in 2016–17?"

Related Link: Citi Not Convinced By Philip Morris' iQos

16. "How do you assess the industry's legal defenses against plain packaging in the EU relative to Australia?"
17. "Beyond the obvious threat of plain packaging, are there any other regulatory dynamics (e.g., menthol regulation, increased warning label size) that you believe could have a material impact on the business over the midterm?"
18. "How would you assess the relative effectiveness of your iQOS marketing strategies in various geographies?"
19. "Do you still view EPS accretion as feasible for the product in 2018, and how should investors think about the magnitude of improvement in 2017 vs. the current year's ~$300–400 million upfront investment?"
20. "Are there specific thresholds relative to other consumer electronics products or versus the cost of a pack of Heatsticks that are most relevant?"
21. "Do you still expect to begin making formal applications for reduced exposure marketing claims for iQOS in 2016?"
22. "In cases where existing products such as Ploom TECH have been launched in Fukuoka, has there been a material impact on iQOS trial or conversion?"
23. "Is there any evidence that the level of nicotine delivery for e-cigarettes relative to combustible cigarettes is beginning to improve/normalize in a way that could narrow the performance gap between e-cigs and iQOS?"

Related Link: Philip Morris Looking To Regain Market Share In Indonesia With New Product

24. "Can you provide a sense of how quickly manufacturing capacity should build from current levels (5–6 billion) to the anticipated 30 billion capacity of the Bologna facility by the end of 2017?"
25. "Do you remain on track for a national launch of Platform 2 (potentially in Romania?) during 2017?"
26. "Is there significant interest from China's CNTC in iQOS? Do you believe this has the potential to increase the scope of your relationship in the coming years?"
27. "More generally, what is your outlook for overall cost increases ex-RRP beyond 2017, and do you believe the current 1–3 percent target is sustainable long-term?"
28. "How would you characterize your capacity utilization, both within the EU and globally, and what are the practical (i.e., governmental, tax, etc.) constraints?"
29. "How confident are you that the industry can avoid a worst case scenario here, given some of the challenges you've encountered in the Canadian legal system?"
30. "Given where the payout ratio stands today, in mid-90's on a 2016 basis, how you think about the company's prospects for dividend growth over the next several years?"
31. "Do you foresee actively pursuing bolt-on M&A opportunities or increased ownership in existing subsidiaries during the next 12–18 months?"
32. "Can you address the net impact of your decision to control your own distribution in both the UK and Morocco, and what you see as the net benefits of this change over time?"
33. "Can you speak broadly about how illicit trade has trended as a percent of total industry volumes during the past 12–24 months, particularly in light of the sustained improvement you have seen within the EU?"

Morgan Stanley has an Overweight rating and $110 price target on Philip Morris shares, which closed Monday's trading at $99.14.

Full ratings data available on Benzinga Pro.