Will Philip Morris (PM) Surprise this Earnings Season? - Analyst Blog

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Philip Morris International Inc. ( PM ) is set to report second-quarter fiscal 2014 results on Jul 17. Last quarter, the company delivered a positive surprise of 1.7%. Let us see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Philip Morris International has been reporting decent earnings results for the past few quarters backed by positive pricing. Its impressive brand portfolio of tobacco and wine products helps it to maintain a strong business momentum.

However, the company has been facing dwindling volumes due to declining demand as a result of the ongoing anti-tobacco campaigns. Governments around the world are levying higher excise taxes on cigarettes and imposing packaging and advertising restrictions on cigarette makers. This has resulted in a pricing war among tobacco companies and significant cut in prices of low and mid-range cigarettes.

The ongoing currency headwinds and difficult pricing environment prompted Philip Morris to cut its fiscal 2014 outlook on Jun 27, 2014. Philip Morris expects adjusted earnings to grow at the lower end of its previously provided guidance of 6-8%. Including unfavorable currency impact Philip Morris expects fiscal 2014 earnings to be within $4.87-$4.97 compared with $5.09-$5.19 as expected previously. Weak macroeconomic environment in the European Union and rising illicit trade in Asia coupled with higher excise taxes have led the company to lower the outlook.

Earnings Whispers?

Our proven model does not conclusively show that Philip Morris International is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However, that is not the case here due to the following factors:

Zacks ESP: ESP for Philip Morris is 0.00%.

Zacks Rank: Philip Morris has a Zacks Rank #4 (Sell). We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some other companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Domino's Pizza Inc. ( DPZ ) , with an Earnings ESP of +1.54% and a Zacks Rank #2 (Buy).

Dr Pepper Snapple Group, Inc. ( DPS ), with an Earnings ESP of +3.30% and a Zacks Rank #3 (Hold).

The Coca Cola Company ( KO ) , with an Earnings ESP of +4.76% and a Zacks Rank #3.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: DPZ , PM , KO , DPS

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