Philip Morris (PM) Q4 Earnings & Sales Miss, Guides 2018

Philip Morris International Inc (NYSE:PM) once again disappointed investors, with both the top and bottom line missing the Zacks Consensus Estimate in fourth-quarter fiscal 2017. Notably, both earnings and revenues have missed the consensus mark for the fourth straight quarter. Moreover, the company provided fiscal 2018 view, which came in below the consensus estimate.

Quarter in Detail

Adjusted earnings of $1.31 per share missed the Zacks Consensus Estimate of $1.36. However, adjusted earnings in the reported quarter jumped 19.1% from the year-ago period.

Net revenue, excluding excise taxes, was $8,294 million, which increased 19% (up 18.8% excluding favorable currency of $14 million) in the fourth quarter. However, net revenues lagged the Zacks Consensus Estimate of $8,372 million. Favorable pricing and volume/mix in the quarter drove revenues. While, revenues increased in the European Union (EU), Asia, Latin America & Canada, the same declined in Eastern Europe, the Middle East & Africa (EEMA).

During the quarter, revenues from combustible products inched up 0.3% (down 0.8% excluding negative currency) to $6,651 million. Moreover, Reduced Risk Products (RRPs) reported a whopping increase from last-year quarter, driven by shift of customer preference away from tobacco products. The company generated revenues of $1,643 million from RRPs, significantly higher than $343 million reported last year.

Total cigarette and heated tobacco unit shipment volume rose 3.8% to 212.1 billion units. The figures were unfavorable in the EEMA and in Latin America & Canada mainly due to low cigarette shipment volumes. These were offset by increased volumes in Asia and EU, as well as higher heated tobacco unit shipment volume across all regions. While cigarette shipment volume declined 2.1% in the quarter, heated tobacco unit shipment volume of 15.7 billion units, increased significantly from 3.7 billion units recorded in fourth-quarter 2016.

Adjusted operating companies income was up 25.5% year over year to $ $3,381 million owing to favorable pricing and growth across all regions along with favorable volume/mix in the EU and Asia. Excluding currency impact of $196 million, adjusted operating income increased 18.2%. However adjusted operating margin was down 220 basis points to 40.8%.

Philip Morris International Inc Price, Consensus and EPS Surprise

Guidance

The Zacks Rank #3 (Hold) company provided fiscal 2018 guidance. The company expects earnings per share in the range of $5.20-$5.35, which depicts growth of 34-38% over the earnings of $3.88 in 2017. Excluding a favorable currency impact, the company anticipates adjusted earnings growth of nearly 7-10%. The Zacks Consensus Estimate for 2018 is currently pegged at $5.36.

Share Price Performance

Philip Morris’ shares have gone down 14.3% in the past six months, wider than the industry’s decline of 5%. This can primarily be attributable to the company’s dismal past record.

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