Philip Morris International Inc.
) reported adjusted second quarter 2012 earnings per share of
$1.36, surpassing the prior-year quarter earnings by 9.0%,
excluding currency. The earnings beat the Zacks Consensus Estimate
Earnings went up due to the favorable impact of lower shares
outstanding and share-based payments. We also note that currency
had a negative impact of 7.5% on earnings this quarter.
Revenue in Detail
During the quarter, Philip Morris' net revenue declined 1.8%
from the prior year quarter to $8.1 billion, including an
unfavorable currency impact of $402 million. Revenue was in line
with the Zacks Consensus Estimate. Excluding currency translation,
net revenue increased roughly 2.9% the prior-year quarter, mainly
driven by pricing, which offset volume headwinds.
We note that the company faces difficult year-over-year
comparisons in this quarter, as the prior-year quarter includes
benefits from additional shipments to Japan following disruptions
of its competitors' supply chains in the region.
During the quarter, net revenue in the European Union (EU)
slipped 8.5% from the prior-year quarter to $2.3 billion.
Net revenue in the Eastern Europe, Middle East & Africa
(EEMA) region stood at $2.2 billion, up 6.9% from the prior-year
quarter. Asia recorded net revenue of $2.9 billion, down 2.8% from
the prior-year quarter. The Latin American and Canada region
reported a marginal increase to $829 million in the quarter.
Volumes in Detail
Cigarette shipment volume in the quarter went down by 1.2% from
the prior-year quarter to 238.3 billion units due to volume decline
in all major geographic regions.
In the European region, cigarette shipments declined 9.4%,
driven by a lower market share, particularly in southern
Cigarette shipment volume in Asia declined 0.7% from the
prior-year quarter to 83.6 billion units due to the lower total
market share in Philippines and an unfavorable comparison due to
the Japan Hurdle.
In Latin America and Canada cigarette shipment volumes declined
3.0% due to a lower market share in Mexico.
However, shipment volume in EEMA went up 5.1% on the back of a
higher market share in Turkey and Russia.
During the quarter, shipments of the Marlboro brand of
cigarettes went up by 0.8%, excluding the Japan Hurdle as a result
of growth in the EEMA market -- particularly in North Africa, Saudi
Arabia and Serbia. Shipments of L&M were down by 1.0% during
the quarter, driven by the decline in EU particularly in Greece and
Parliament and Bond Street brands recorded volume growth of 7.1%
and 6.1%, respectively, while Chesterfield and Lark brands and
Philip Morris brand witnessed declines of 2.3%, 5.3% and 7.6%,
respectively, in the quarter.
Philip Morris' quarterly gross profit edged up 0.5% to $5.5
billion from the prior-year quarter, while operating income slipped
2.9% y/y to $3.6 billion during the quarter.
Philip Morris exited the second quarter 2012 with cash and cash
equivalents of $3.8 billion compared to $3.6 billion in the
sequentially preceding quarter. Long-term debt stood at $14.8
billion in the second quarter compared to $14.3 billion in the
During the second quarter, Philip Morris spent $1.5 billion to
repurchase 17.8 million shares. In June 2012, the company announced
a share buy back program of $18.0 billion that is scheduled to
commence on August 1, 2012, as approved by its board of
Concurrent with the earnings release, the company maintains its
guidance and expects 2012 full-year reported diluted earnings per
share to be in a range of $5.10 to $5.20 compared with $4.85 in
2011. It expects currency to have an unfavorable effect of 27 cents
per share, up by 2 cents previously announced. However, adjusted
diluted earnings per share are projected to increase by
approximately 10% to 12% over $4.88 in 2011.
The company's major competitors are
Altria Group Inc.
Reynolds American Inc.
). Currently, we have a Neutral recommendation on the stock.
Further, Philip Morris holds the Zacks #4 Rank, which translates
into a short-term Sell rating.
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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