From that Motley Fool article:
Philip Morris has struggled with currency headwinds and other challenges to its profit growth
Why can no one just state a simple truth and leave it at that? PMI has not struggled "with other challenges" to its profit growth. They have had strong consistent local currency profit growth every single year since they were spun off from MO in 2008, with the past five years being no different in that regard. The only significant difference in the past five years has been negative currency, not some additional other vague "challenges".
On a country by country basis, PMI is earning almost 50% more profit in local currencies in 2016 than they did in 2012. However, when you convert those 2016 much higher local currency profits to US dollars, they are worth fewer dollars than the much lower 2012 local currency profits were worth when converted back then, since the dollar has strengthened by over 50% versus those various currencies since that time.
Switching gears - mo-strategist writes:
I could imagine a hypothetical scenario where IQOS were a runaway "hit" in the USA, with PM's royalties being too low. So in THAT situation PM might not be making as much as it "should" from IQOS, and it might make sense for PM to acquire PMUSA just to take a bigger bite of that "pie". But this is stacking a bunch of hypotheticals on top of one another. . .its way too many assumptions to conclude that a PM-MO merger is just around the corner. Might it not be cheaper for PM to just buy back IQOS rights from PMUSA, if that's what its really after?
I would guess that under the current agreement, PM's US royalties on IQOS will be very low, especially if they simply go ahead and have MO sell it without FDA reduced risk status, and therefore also without any chance of a beneficial lower excise tax.
MO & PM signed a joint R&D sharing agreement when they separated in 2008. They have both put money into developing both IQOS and other next generation products, with PM taking the lead on IQOS and MO taking the lead on vapor products (largely under the Mark Ten brand). Currently IQOS looks more promising than Mark Ten, but that fact alone does not change the joint sharing agreement.
MO would be absolutely crazy and irresponsible to their shareholders to sell IQOS in the US, if they weren't going to earn nearly as much from its sales as they do traditional cigarettes. If successful, IQOS will obviously cannibalize large quantities of sales of Marlboro and MO's other traditional cigarettes since they are 51% of cigarettes sold in the US. Sure, they will hope to capture Reynolds and Imperial's market share as well, but MO obviously has more traditional cigarette market share to lose than all other companies combined. So if MO was only getting a small piece of the IQOS profit pie here in the US, their profits would obviously suffer the more popular IQOS gets.
Which is why I stated that this is the one area that could possibly (and I stress only possibly) be stimulating talks between PM and MO. Given its success in Japan, PM may have increased confidence that IQOS could be that runaway hit in the US as well, and feel the stock market is not adequately reflecting that in MO's share price. But here is the rub. MO obviously now knows that IQOS could be a runaway hit in the US as well, and can't and won't just give up its rights to sell the product here without being adequately compensated for whatever they think they are worth.
Which leads back to my post from earlier today that the scenario might be that PM thinks its stock is currently overvalued and/or MO's is undervalued (especially given the IQOS status) which could drive them to consider a re-merger. But PM would have to pay MO a fair value premium for the current expected value of IQOS in the US anyway, so it is hard to imagine how that would benefit PM shareholders anyway.