Zacks Investment Research downgraded
Philip Morris International Inc.
) to a Zacks Rank #5 (Strong Sell) on Jan 6 due to a significant
foreign exchange drag estimated for fiscal 2013.
Why the Downgrade?
Philip Morris witnessed sharp downward estimate revisions
after reporting lower-than-expected third-quarter 2013
Although the Marlboro owner reported decent earnings of $1.44
per share beating the Zacks Consensus Estimate by 0.7% and the
prior-year earnings by 4.3%, revenues missed the estimate due to
higher-than-expected unfavorable foreign exchange impact and 6%
decline in volume.
Moreover, gross profit declined 0.5% from the prior-year
quarter to $5.3 billion, mainly due to higher excise tax faced by
the company during the quarter. Operating income slipped 1.0%
year over year to $3.7 billion during the quarter due to higher
marketing, administration and research costs.
Philip Morris estimates a stronger currency headwind in the
upcoming quarter and raised currency impact to 33 cents per share
for fourth quarter 2013 from 31 cents per share announced
Almost all the estimates were revised downward following the
cautious outlook of the company. The Zacks Consensus Estimate for
fourth-quarter 2013 slipped 9.2% to $1.28 per share over the last
60 days. For 2013, the Zacks Consensus Estimate slipped 0.4% to
$5.41 per share.
Moreover, the company is facing difficult industrial
conditions due to declining demand owing to ongoing anti-tobacco
campaigns. Governments around the world are hiking excise tax on
cigarettes and imposing packaging and advertising restrictions on
In Nov 2013, Philip Morris announced that it is going to foray
into the e-cigarette category. However, recent developments in
European Union, such as a probable restriction on the sale of
e-cigarettes, are a concern.
Other Stocks to Consider
Some better-ranked tobacco companies include
Altria Group Inc.
). While Altria carries a Zacks Rank #1 (Strong Buy) Lorillard
carries a Zacks Rank #2 (Buy). Another consumer staple company
worth considering is
Green Mountain Coffee Roasters Inc.
) which carries a Zacks Rank #2.
GREEN MTN COFFE (GMCR): Free Stock Analysis
LORILLARD CO (LO): Free Stock Analysis Report
ALTRIA GROUP (MO): Free Stock Analysis Report
PHILIP MORRIS (PM): Free Stock Analysis
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