Stanley Druckenmiller is one of the greatest investors of all time. As head of Duquesne Capital Management for nearly three decades, from 1981 to 2010, he generated an average annual return of 30% and never had a losing year.

Druckenmiller also worked closely with George Soros, helping to “break the Bank of England” with a massive bet on the pound in 1992.

Today, Druckenmiller is retired as a hedge fund manager, but he still manages his own money through the Duquesne Family Office, and the billionaire’s moves are worth following. Druckenmiller was very early in recognizing the growth potential of Nvidia in artificial intelligence (AI), aggressively entered the stock in the fourth quarter of 2022 after the release of ChatGPT, but he recently admitted that he sold it too early, abandoning it all early This year.

However, Druckenmiller made another smart buy earlier this year, purchasing 889,355 shares of Philip Morris International (PM -2.21%) and call options giving him the right to purchase an additional 963,000 shares of the tobacco stock.

Druckenmiller opened a position in the stock in the second quarter, and while we don’t know exactly when he purchased the stock, we do know that he has increased significantly on the dividend stock since then. Philip Morris has gained 30% since the end of the second quarter, an impressive feat for a high-yielding dividend stock, and the stock just jumped during its third-quarter earnings report.

Let’s take a look at these numbers and where the company stands today before discussing whether it makes sense to follow Druckenmiller in the stock.

Image source: Getty Images.

Philip Morris is on fire

Although smoking is on the decline in much of the world, Philip Morris has adapted to this reality better than its two closest stock market peers, Altria And British American Tobacco.

About 40% of its revenue now comes from next-generation products like its Iqos devices, which heat real tobacco without burning it, and Zyn, the popular oral nicotine pouches acquired in the $16 billion acquisition of Swedish Match in 2022. growing in these two categories, adding new factories to increase Zyn production and deploying Iqos in the United States

That strength showed up in the company’s third-quarter earnings report, as Philip Morris beat analyst estimates and the stock jumped 10.5% on Wednesday.

The tobacco group reported revenue of $9.91 billion, up 11.6% on an organic basis (i.e. excluding the impact of exchange rates, divestments and acquisitions ), and ahead of estimates of $9.69 billion. Organic revenue from its smoke-free business jumped 16.8% to $3.8 billion, and its fuels business delivered organic revenue growth of 8.6% thanks to rising prices and a 1.3% increase in cigarette volumes to 163.2 billion.

Its oral smoke-free business, consisting primarily of Zyn, continued to shine with shipments up 22.2% to 4.4 billion.

This growth helped the company expand its margins, with organic operating profit up 13.8% to $3.7 billion and adjusted earnings per share (EPS) up 14.4% to $1.91.

Finally, the company also raised its full-year guidance, calling for adjusted EPS of $6.45 to $6.51, up from its previous range of $6.33 to $6. $45 and compared to the consensus of $6.41. On a currency-neutral basis, it forecasts EPS of $6.85 to $6.91, up 14% to 15% from 2023.

Is Philip Morris a Buy?

Druckenmiller didn’t explain why he bought the international tobacco seller, but recent results should offer some guidance.

Philip Morris is executing flawlessly and achieving double-digit growth in a market that many believe is in inevitable decline. While peers like Altria and British American Tobacco trade at single-digit price-to-earnings ratios, Philip Morris has earned a premium, trading at a P/E of 20 based on this year’s guidance.

Additionally, it offers a dividend yield of 4.5% and just increased its dividend by 3.8% to $1.35 per quarter. Given the underlying business growth, the company should have no problem increasing its dividend in the coming years.

With earnings growing in the mid-teens and plenty of white space for Zyn and Iqos, the tobacco stock continues to look like a smart buy.