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Philip Morris (PM) Q1 Earnings Top Estimates, Revenues Down

Zacks Equity Research

Philip Morris International Inc PM delivered first-quarter 2018 results, with the top and the bottom line beating the Zacks Consensus Estimate. Also, the company’s earnings improved year on year. While pricing continued to remain an upside, the quarterly results also gained from improved net shipment volumes. However, lower revenues in the combustible category dented results.

Quarter in Detail

Adjusted earnings per share (EPS) of $1.09 beat the Zacks Consensus Estimate of $99 cents. Also, the bottom line improved 9% year over year. Excluding the unfavorable impact of 6 cents from currency fluctuations, the bottom line rose 15% from the year-ago quarter’s tally.

Net revenues of $6,751 million beat the Zacks Consensus Estimate of $6,735 million. However, the top line declined 2.1% in the reported quarter. Nevertheless, the metric was up 3.2% on a constant-currency (cc) basis, backed by favorable pricing across most regions

Philip Morris International Inc. Price, Consensus and EPS Surprise

Philip Morris International Inc. Price, Consensus and EPS Surprise | Philip Morris International Inc. Quote

During the quarter under review, revenues from combustible products declined 4.5% to $5,508 million. Except South & Southeast Asia, the category depicted declines across most regions. Further, revenues in the Reduced-Risk Products (RRPs) improved 10.3% to $1,243 million. Growth in RRPs in most regions was partially offset by decline in East Asia & Australia.

Total cigarette and heated tobacco unit shipment volume inched up 1.1% to 175.8 billion units. While cigarette shipment volume were flat at 164.3 billion units in the first quarter, heated tobacco unit shipment volume of almost 11.5 billion units increased 20.2% year over year.

Adjusted operating income went up 3.2% year over year to $2,503 million. The metric rose 9.1% at cc. Adjusted operating margin also expanded 190 basis points to 37.1% on improved pricing variance and reduced manufacturing costs. This was partially countered by higher administration, marketing and research expenses.

Region-Wise Performance

Net revenues in European Union increased 8.6% to $ 2,159 million. Revenues climbed 15.8% at cc, courtesy of favorable pricing and volume/mix. Total shipment volume in the region improved 2.9% to 41,781 million units.

In Eastern Europe , net revenues grew 2.1% to $579 million and rose 13.4% at cc. The upside can be attributed to favorable pricing and volume/mix. Total shipment volumes fell 3.3% to 21,868 million units.

In Middle East & Africa region, net revenues declined 3.5% (up 3.5% at cc) to $927 million. Further, total shipment volumes expanded 13.7% to 34,058 million units.

Moving to South & Southeast Asia , revenues went up 3% (up 8.6% at cc) to $1,113 million. Performance was aided by favorable volume/mix and pricing.  Shipment volumes grew 3.2% to 41,492 million units.

Revenues from East Asia & Australia declined 17% to $1,321 million, mainly due to unfavorable volume mix. The downside was partially countered by improved pricing. Total shipment volumes went down as much as 11.5% to 18,962 million units.

Finally, revenues from Latin America & Canada fell 7.9% (down 3.2% at cc) to $652 million. Favorable pricing was more than offset by adverse volume mix. Moreover, total shipment volumes were down 7.4% to 17,634 million units.

Other Financials

Philip Morris ended the quarter with cash and cash equivalents of $3,081 million. Also, the company had long-term debt of $23,131 million and shareholders’ deficit of $10,185 million.

Also, in the reported quarter, management paid quarterly dividend of $1.14 per share.

Guidance

Philip Morris revised outlook for 2019. Earnings are now expected at $4.87 compared with the earlier forecast of $5.28. Adjusted earnings are anticipated to be nearly $5.09, reflecting growth of almost 5.7% from the year-ago reported figure. Excluding the impacts of unfavorable currency of approximately 14 cents, earnings are projected to rise at least 8% to reach $5.23. The Zacks Consensus Estimate for 2019 is currently pegged at $5.22. Further, management expects effective tax rate for 2019 to be roughly 23%.



Price Performance & Zacks Rank

Shares of the company gained 17.4% in the past three months compared with the industry’s increase of 20.7%. Currently, Philip Morris has a Zacks Rank #3 (Hold).

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