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What's in Store for Philip Morris (PM) this Earnings Season?

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Philip Morris International Inc.PM is set to report third-quarter 2015 results on Oct 15. Last quarter, the company delivered a positive earnings surprise of 8.04%.

In fact, the tobacco major delivered positive surprises in all the four previous quarters with an average earnings surprise of 12.47%.

Let's see how things are shaping up for this announcement.

Factors at Play

Philip Morris has been facing dwindling volumes of cigarettes as the anti-tobacco campaigns are gathering pace worldwide. Although decline rate are improving, it will take time to recover fully. Governments across the world have imposed higher excise taxes on cigarettes leading tobacco companies to raise prices which, in turn, are lowering volumes. Further, fake versions of top-branded cigarettes sold by local retailers are denting volumes. This trend is likely to continue in the third quarter as well thus putting pressure on both the top line and the bottom line.

However, Phillip Morris might be able to steer clear of these macroeconomic headwinds backed by positive pricing. Improved volumes, strong brand portfolio, robust line of product innovation have been boosting the company's results for the past few quarters. Moreover, lower gas prices will reduce cost of shipment for the company, which is expected to reduce margin pressure.

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 (Strong Buy), 2 (Buy) or 3 (Hold) 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% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.11 per share.

Zacks Rank: Philip Morris' Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are some consumer staples 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:

Flower Foods Inc. FLO , with an Earnings ESP of +4.17% and a Zacks Rank #2.

Keurig Green Mountain Inc. GMCR , with an Earnings ESP of +4.23% and a Zacks Rank #3.

The Procter & Gamble Company PG , with an Earnings ESP of +1.06% and a Zacks Rank #3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

PROCTER & GAMBL (PG): Free Stock Analysis Report

PHILIP MORRIS (PM): Free Stock Analysis Report

KEURIG GREEN MT (GMCR): Free Stock Analysis Report

FLOWERS FOODS (FLO): Free Stock Analysis Report

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Zacks Investment Research

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


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

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