The economic fallout from the war in Ukraine could take a major bite out of Philip Morris ' business, according to JPMorgan. Analyst Jared Dinges downgraded Philip Morris to neutral from overweight, saying in a note to clients Monday that the war was hitting two key markets for the company, with sales of heated tobacco units being particularly impacted. "The two countries account for c23% of its HTU volume (Russia 17%, Ukraine c6%) and their continued growth is instrumental for [Philip Morris] to reach its 2022 and ... [next generation products] targets. With JPM economists cutting Russia GDP growth forecasts and [Philip Morris International] operations in Ukraine currently suspended, we cut our Eastern Europe HTU volume forecasts and no longer expect PMI to achieve its FY22 HTU guidance," Dinges wrote. Marlboro HeatSticks, the company's heated tobacco units, are a major part of the next generation products that make up the bull case for Philip Morris, JPMorgan said. "NGP momentum is a fundamental pillar in the PMI equity story; with visibility on PMI's NGP outlook quickly deteriorating (and unlikely to improve near term) and downside risks growing, we downgrade to Neutral," Dinges wrote. Overall, Ukraine and Russia account for about 8% of Philip Morris' group sales, JPMorgan said. The stock has dropped about 3% since the start of February, before the war began. JPMorgan cut its price target on the stock to $110 per share from $130. The new target is roughly 10% above where the stock closed on Friday. —CNBC's Michael Bloom contributed to this report.
The economic fallout from the war in Ukraine could take a major bite out of Philip Morris' business, according to JPMorgan.
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