On Feb 20, 2014, Zacks Investment Research downgraded
Philip Morris International Inc.
) to a Zacks Rank #5 (Strong Sell) owing to the cautious outlook
Why the Downgrade?
Philip Morris witnessed sharp downward estimate revisions
after reporting lower-than-expected fourth-quarter 2013 results
on Feb 06, 2014
Although the Marlboro owner reported earnings of $1.37 per
share, in line with the Zacks Consensus Estimate and higher than
year ago earnings by 10.5%, revenues missed the prior-year
results due to higher unfavorable foreign exchange impact. Net
revenue went down by 1.3% to $7.8 billion. However, it beat the
Zacks Consensus Estimate of $7.7 billion by 1.3%. Excluding the
impact of an unfavorable currency translation, net revenue
increased roughly 2.5% from the prior-year quarter, mainly driven
by favorable pricing.
Moreover, gross profit declined 0.4% from the prior-year
quarter to $5.2 billion, mainly due to higher excise tax during
the quarter. Operating income slipped 1.1% year over year to $3.2
billion due to higher marketing, administration and research
Anticipating stronger currency headwind in the upcoming year,
Philip Morris expects currency impact to be 71 cents per share
for fiscal 2014 more than double the 34 cents experienced in
Almost all the estimates were revised downward following the
cautious outlook of the company. The Zacks Consensus Estimate for
first-quarter 2014 slipped 8.7% to $1.16 per share over the last
30 days. For 2014, the Zacks Consensus Estimate slipped 7.4% to
$5.11 per share during the same timeframe.
Moreover, the company is facing difficult industrial
conditions due to declining demand resulting from the ongoing
anti-tobacco campaigns. Governments around the world are hiking
excise tax on cigarettes and imposing packaging and advertising
restrictions on cigarette makers.
In Nov 2013, Philip Morris announced that it is going to foray
into the e-cigarette category. However, probable ban on
e-cigarettes by the European government are a concern.
Other Stocks to Consider
Some better-ranked stocks in the consumer staples sector worth
Post Holdings, Inc.
Diamond Foods Inc.
The Hain Celestial Group Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
DIAMOND FOODS (DMND): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
PHILIP MORRIS (PM): Free Stock Analysis
POST HOLDINGS (POST): Free Stock Analysis
To read this article on Zacks.com click here.