Phillip Morris Beats; Lifts Guidance - Analyst Blog
April 21 2011 - 1:30PM
Zacks
Cigarette manufacturer and marketer Philip Morris
International Inc. (PM) reported
first-quarter 2011 earnings per share, excluding special items, of
$1.06 a share.
The result was 1.9% above the Zacks Consensus Estimate of
$1.04.
However, compared to the prior-year period, Philip Morris’
earnings per share were up 17.8%, attributable to price increases
and strong volume growth in Asia.
Revenue, Volumes & Margins
During the quarter, Philip Morris’ net revenues grew 4.5%
year-over-year to $6.8 billion. The growth over the third quarter
of 2009 was mainly driven by favorable pricing across all business
segments/acquisitions, partly offset by unfavorable currency
translations and volume mix.
Excluding the impact of currency and acquisitions, organic
revenues increased 4.3%.
Cigarette shipment volume in the quarter grew by 1.6%
year-over-year to 207.9 billion units, primarily driven by an
impressive 14.0% growth in Asia as Philip Morris recorded strong
gains in Indonesia and Philippines. However, volume in EEMA,
European Union and Latin America and Canada (Eastern Europe, Middle
East & Africa) decreased 0.8%, 7.3% and 5.5% respectively.
In the European Union, cigarette shipment volume dropped from
the third quarter of 2009, predominantly due to lower total
markets, while Latin America & Canada shipments were down
mainly on the back of unfavorable impact of excessive tax increases
in Mexico. Excluding acquisitions, Philip Morris’ organic cigarette
shipment volume witnessed a decline of 3.3%.
During the quarter, shipments of Marlboro declined 2.9% as a
result of the lackluster EU market (mainly in Germany, Greece, and
Italy). Shipments of L&M were down 8.2% in the quarter due to
unfavorable impact of excessive tax increase in Mexico.
Chesterfield and Lark brands recorded decline rates of 0.4% and
5.9%, respectively, while Parliament and Bond Street witnessed
increases of 9.0% and 2.3%.
Philip Morris’ quarterly gross profit expanded 9.0%
year-over-year to $4.5 billion, while gross margin increased 75
basis points (bps) to 27.2%. Operating income increased 10.8% to
$3.1 billion, while operating margin increased 79 basis points to
15.6%.
Financial Analysis
As of December 31, 2010, Philip Morris had cash and cash
equivalents of $1.3 billion and long-term debt (including current
portion) of $11.9 billion.
Dividends & Share Buyback &
Acquisition
During the reported quarter, the company repurchased 22.2
million shares for $1.36 billion. During the quarter, the company
also signed an agreement to acquire the cigarette manufacturing
assets and trademarks of International Tobacco & Cigarettes
Company Ltd. in Jordan.
Guidance
Concurrent with the earnings release, the company raised its
outlook for fiscal 2011. Phillip Morris now expects earnings to be
in the range of $4.55 to $4.65 for fiscal 2011. The current Zacks
Estimate of $4.48 is below the company’s guidance range.
Excluding the impact of foreign currency, earnings are expected
to increase by approximately 11% to 13.5%.
The company’s major competitors Altria Group
Inc. (MO) and Reynolds American Inc.
(RAI) reported In line earnings. Phillip Morris currently has a
Zacks #2 Rank which implies short term ‘Buy’ rating on the stock.
However, on a long term basis we remain ‘Neutral’ on the stock.
ALTRIA GROUP (MO): Free Stock Analysis Report
PHILIP MORRIS (PM): Free Stock Analysis Report
REYNOLDS AMER (RAI): Free Stock Analysis Report
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