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Despite their reputation as "sin stocks," tobacco company shares have historically enjoyed rather wide popularity among investors. Many investors like them because of their high margins, robust cash flow, and the high dividends they typically pay. That outsized interest helps explain why more than a few analysts are bullish on the sector.

Tobacco industry mainstay Philip Morris International (NYSE: PM) was the subject of a recent research note. The report concluded that the stock was indisputably a buy at its current price.

Remaining in the bullpen

The analyst behind the note was Bonnie Herzog of Goldman Sachs. She published an update on Philip Morris following its most recent quarterly earnings release. In her note, Herzog kept her buy recommendation and $118 per-share price target intact. That suggests a 24% upside over the next 12 months from the current price.

The tobacco company did well in its first quarter of 2024. It posted notable growth in revenue and profitability, beating the consensus analyst estimates for both metrics. This was due in no small part to solid gains with IQOS, a product in which the tobacco is heated rather than burned. Management clearly feels optimistic about the future, as it raised its guidance on both the top and bottom lines.

Herzog wrote that, "Ultimately we believe management's decision to raise guidance this early in the year is a positive and suggests management has good visibility into its business."

Transitioning from the traditional

In its earnings release, Philip Morris spent quite a few words discussing the growth of its smoke-free business (SFB), not least because such products now comprise 39% of the company's revenue.

It seems Philip Morris is transitioning fairly smoothly from a purveyor of traditional tobacco cigarettes to products considered to be safer to the world and less harmful to users. After a period of decline, its all-important free cash flow (FCF) figure is on the rise, too, which means plenty of funding for that ever-rising, high-yield dividend. For folks who don't mind owning a controversial stock, Philip Morris seems like quite the good buy these days.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.