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Will Philip Morris (PM) Disappoint This Earnings Season? - Analyst Blog

Zacks Equity Research
Updated

Philip Morris International Inc. (PM) is set to report first-quarter 2015 results on Apr 16. Last quarter, the company delivered a positive earnings surprise of 23.58%. Let's see how things are shaping up for this announcement.

Factors at Play

We believe that it will be difficult for Philip Morris to surpass estimates in the first quarter. The company has been facing dwindling volumes of cigarettes due to declining demand of tobacco products as a result of the ongoing anti-tobacco campaigns. This trend is likely to continue in the first quarter as well thus putting pressure on both the top and the bottom line.

To add to the woes, a strengthening dollar has led to a negative foreign currency impact on Philip Morris which generates significant revenues from its international operations.

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Moreover, higher excise taxes, and packaging and advertising restrictions imposed by governments on tobacco companies are putting Philip Morris’ margins under pressure.

This has resulted in a pricing war among tobacco companies leading to significant price cuts of low and mid-range cigarettes. Moreover, the European Union has decided to make plain packaging mandatory for tobacco manufacturers, as have governments elsewhere.

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% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.02 per share.

Zacks Rank: Philip Morris has a Zacks Rank #4 (Sell).

We as its is 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.

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:

Tyson Foods Inc. (TSN), with an Earnings ESP of +8.00% and a Zacks Rank #2 (Buy).

Estee Lauder Inc. (EL), with an Earnings ESP of +1.96% and a Zacks Rank #3 (Hold).

Pilgrims Pride Corporation (PPC), with an Earnings ESP of +5.20% and a Zacks Rank #3.


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PHILIP MORRIS (PM): Free Stock Analysis Report
 
ESTEE LAUDER (EL): Free Stock Analysis Report
 
TYSON FOODS A (TSN): Free Stock Analysis Report
 
PILGRIMS PRIDE (PPC): Free Stock Analysis Report
 
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Zacks Investment Research