Philip Morris International Inc.
) reported adjusted third quarter 2012 earnings per share of
$1.45, surpassing the prior-year quarter earnings by 5.8%,
excluding currency. Earnings beat the Zacks Consensus Estimate of
Earnings shot up on the back of higher revenues, favorable
impact of lower shares outstanding and share-based payments.
Revenue in Detail
Excluding currency translation and acquisition, net revenue
increased roughly 3.4% from the prior-year quarter, mainly driven
by pricing, which offset volume/mix headwinds. During the
quarter, Philip Morris' net revenue declined 5.3% from the
prior-year quarter to $7.9 billion, including an unfavorable
currency impact of $731 million. Revenue also lagged the Zacks
Consensus Estimate of $8.3 billion.
During the quarter, net revenue in the European Union (EU)
slipped 15.2% from the prior-year quarter to $2.1 billion,
including unfavorable currency.
Net revenue in the Eastern Europe, Middle East & Africa
(EEMA) region stood at $2.2 billion, down 0.1% from the
prior-year quarter. Asia recorded net revenue of $2.7 billion,
down 1.4% from the prior-year quarter. The Latin American and
Canada region reported a decrease of 2.4% to $827 million in the
Volumes in Detail
Cigarette shipment volume in the quarter went down 1.3% from
the prior-year quarter to 236.5 billion units due to volume
decline in European Union, Latin America and Canada region.
In the European region, cigarette shipments declined 8.1%,
driven by a lower market share, particularly in southern Europe.
In Latin America and Canada, cigarette shipment volumes declined
4.9% due to lower total market share in Argentina, Brazil,
Colombia and Mexico.
Cigarette shipment volume in Asia increased 0.6% from the
prior-year quarter, mainly in Indonesia, Thailand and Vietnam,
offset by lower market share in Japan and Korea.
However, shipment volume in EEMA went up 3.0% on the back of
improved market conditions in Egypt and favorable distributor
inventory movements and higher market share in Russia.
During the quarter, shipments of the Marlboro brand of
cigarettes went down by 2.3%, while that of L&M brand went up
3.4% during the quarter. Parliament and Bond Street brands
recorded volume growth of 10.7% and 3.4%, respectively.
Chesterfield, Lark and Philip Morris brands witnessed declines of
6.0%, 16.0% and 4.0%, respectively, in the quarter.
Philip Morris' quarterly gross profit slipped 3.2% from the
prior-year quarter to $5.3 billion, while operating income
declined 1.5% y/y to $3.6 billion during the quarter.
Philip Morris exited the third quarter 2012 with cash and cash
equivalents of $4.8 billion compared with $2.6 billion in the
sequentially preceding quarter. Long-term debt stood at $17.5
billion in the third quarter compared with $14.8 billion in the
Share Buyback and Dividend Update
During the quarter, Philip Morris spent $1.5 billion to
repurchase 16.7 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 forecasts
earnings in the range of $5.12 to $5.18 per share, representing a
growth rate of approximately 11% to 12% versus adjusted earnings
of $4.88 per share in 2011.
This excludes the unfavorable impact of currency, net tax
expense of 5 cents per share and year-to-date asset impairment
and exit costs of 2 cents per share. This guidance also excludes
the impact of any potential future acquisitions, unanticipated
asset impairment and exit cost charges.
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 a Zacks #2 Rank (short-term Buy
ALTRIA GROUP (MO): Free Stock Analysis Report
PHILIP MORRIS (PM): Free Stock Analysis
REYNOLDS AMER (RAI): Free Stock Analysis
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