PHILIP MORRIS INTERNATIONAL INC. NYSE: PM Target Price $68.00, Argus Recommendations Buy â¢ PM: Initiating coverage with BUY rating â¢ PM, which was recently spun off from Altria, is focused on rapidly growing international markets, where regulation and litigation are laxer and demand for cigarettes is rising rather than falling. â¢ Our 12-month target price of $78, combined with the dividend yield I n the second quarter of 2008, PM's net income rose nearly 23% year-over-year to $1.7 billion, and EPS rose to $0.84 from $0.70 in the prior-year period. R evenues grew 20.1% to $16.7 billion, and operating income advanced 21.9% to $2.73 billion. F o r the first half of 2008, earnings totaled $3.68 billion or $1.75 per share, compared to $2.92 billion or $1.38 per share in the first half of 2007. Revenues in the first half rose 18.7% year-over-year to $32.3 billion, while operating income increased 25.0% to $5.55 billion. During the second quarter, PM announced an agreement to buy all the outstanding shares of Rothmans Inc. of Canada for CAD $30 per share, for a total deal value of CAD $2 billion. Rothmans Inc. has a 60% interest in Rothmans, Benson & Hedges Inc. (RBH), which sells Benson & Hedges, Craven A, Mark Ten and ... FINANCIAL STRENGTH & DIVIDEND W e rate Phillip Morris' financial strength as High, the top of our five-point scale. EBITDA covered interest expense by 35-times in the second quarter; our 2008 EBITDA estimate represents a coverage ratio of 35. PM's net debt/equity ratio was roughly 0.4 at the close of the second quarter. Management expects to generate over $11 billion in operating earnings and net earnings of more than $7.5 billion in 2008, compared to long-term debt of about $6 billion. P M operates in a resilient industry that is able to survive economic downturns and remain highly profitable. ......September 16, 2008 The following report was produced by an independent research provider selected by an Independent Consultant as required under the Global Research Analyst Settlement and does not guarantee the accuracy, completeness, or timeliness of the following report.