Philip Morris International Inc.
) reported adjusted third quarter 2012 earnings per share of
$1.24, surpassing the comparable prior-year quarter earnings by
12.7%. Excluding currency impact of 4 cents, adjusted earnings
exceeded the prior-year quarter earnings by 16.4%. Earnings beat
the Zacks Consensus Estimate of $1.22.
Earnings shot up on the back of higher revenues and favorable
impact of lower shares outstanding.
Revenue and Margin
Excluding the impact of currency translation and acquisitions,
net revenue increased roughly 6.4% from the prior-year quarter,
mainly driven by favorable pricing. During the quarter, Philip
Morris' net revenue inched up 2.8% from the prior-year quarter to
$7.9 billion, including an unfavorable currency impact of $270
million. Revenue also exceeded the Zacks Consensus Estimate of
During the quarter, net revenue in the European Union (EU)
slipped 6.6% from the prior-year quarter to $2.1 billion,
including unfavorable currency.
Net revenue in the Eastern Europe, Middle East & Africa
(EMEA) region stood at $2.1 billion, up 8.5% from the prior-year
quarter. Asia recorded net revenue of $2.8 billion, up 6.0% from
the prior-year quarter. The Latin American and Canada region
reported an increase of 4.5% to $882 million in the quarter.
Philip Morris' quarterly gross profit increased 4.6% from the
prior-year quarter to $5.2 billion, while operating income went
up 9.5% year over year to $3.2 billion during the quarter.
Volumes in Detail
Cigarette shipment volume excluding acquisitions went up 2.9%
year over year to 233.1 million units on the back of increase in
shipment volume in the EMEA region.
In the European region, cigarette shipments declined 5.7%,
driven by a lower market share, particularly in France and
In Latin America and Canada, cigarette shipment volumes
declined 1.1% due to lower total market share in Mexico and
partly offset by share gains in Brazil.
Cigarette shipment volume in Asia went up 5.7% from the
prior-year quarter, mainly in Indonesia and the Philippines.
Shipment volume in EMEA grew 7.1% on the back of improved
market conditions in Egypt and Turkey.
During the quarter, shipments of the Marlboro brand of
cigarettes went up by 1.2% fuelled by growth in EMEA particularly
in North Africa and Turkey. Shipment volume of the L&M brand
went up 9.7% during the quarter also mainly due to EMEA.
Parliament and Bond Street brands recorded volume growth of 12.4%
and 2.2%, respectively.
Chesterfield and Philip Morris witnessed a decline of shipment
volume of 5.9% and 2.0% respectively, while Bond Street witnessed
an increase of 2.2%.
Full Year Results
For the full year 2012 earnings per share of $5.22 surpassed
the prior-year earnings by 7.0%. Excluding currency, adjusted
earnings beat prior-year earnings by 11.7%. Earnings beat the
Zacks Consensus Estimate of $5.21.
Net revenue went up 0.9% to $31.4 billion from the prior year.
Excluding currency, revenue went up by 5.6%
Philip Morris exited the fourth quarter 2012 with cash and
cash equivalents of $3.0 billion compared with $4.8 billion in
the preceding quarter. Long-term debt stood at $17.6 billion in
the fourth quarter compared with $17.5 billion in the previous
Share Buyback and Dividend Update
During the quarter, Philip Morris spent $6.5 billion to
repurchase 74.9 million shares. After completing a three-year
share buyback program worth $12 billion in July 2012, the company
announced a new share buyback program of $18.0 billion in August
The company increased its quarterly dividend by 10.4% during
the quarter to 85 cents from 77 cents, representing an annualized
rate of $3.40 per common share.
Concurrent with the earnings release, the company issued
guidance. Accordingly, earnings are forecasted to be in the range
of $5.68 to $5.78 per share for 2013, representing a growth rate
of approximately 10% to 12% versus adjusted earnings of $5.22 per
share in 2012. The Zacks Consensus Estimate of $5.79, was much
better than guided, indicating downward estimate revisions.
This excludes the unfavorable impact of currency and net tax
expense of 6 cents per share. This guidance also excludes the
impact of any potential future acquisitions, unanticipated asset
impairment and exit cost charges.
Philip Morris carries a Zacks Rank #4 (Sell). However, we
would recommend some other stocks, such as
Flowers Foods Inc.
) - Zacks Rank #1 (Strong Buy) ,
Procter & Gamble Company
) - Zacks Rank #2 (Buy) that are currently doing well and are
worth considering in the consumer staples industry.
FLOWERS FOODS (FLO): Free Stock Analysis
KELLOGG CO (K): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
PHILIP MORRIS (PM): Free Stock Analysis
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