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Philip Morris (PM) Q3 Earnings Top Estimates, Sales Improve Y/Y

Zacks Equity Research

Philip Morris International Inc. PM delivered third-quarter 2019 results, with the top and the bottom line beating the Zacks Consensus Estimate. Also, the company’s top line rose year on year.

The quarterly results benefited from higher revenues and shipment volumes in the heated tobacco category. Also, favorable pricing was a key growth driver across most regions.  On the flip side, dismal performance in the combustible category was a drag.

Quarter in Detail

Adjusted earnings per share of $1.43 beat the Zacks Consensus Estimate of $1.35. The bottom line inched down 0.7% year over year. On a like-for-like basis, after excluding currency, the bottom line rose 5.9%.  

Net revenues of $7,642 million beat the Zacks Consensus Estimate of $7,610 million. The top line inched up 1.8% in the reported quarter. Excluding currency, the metric was up 3.4%, backed by favorable pricing variance and volume/mix.

Philip Morris International Inc. Price, Consensus and EPS Surprise

 

Philip Morris International Inc. Price, Consensus and EPS Surprise

Philip Morris International Inc. price-consensus-eps-surprise-chart | Philip Morris International Inc. Quote

During the quarter under review, revenues from combustible products declined 5.7% to $6,298 million. Except South & Southeast Asia and Middle East & Africa, figures in the category declined across most regions. Further, revenues in the RRPs improved 63.4% to $1,344 million. Growth in RRPs in most regions was partially offset by decline in Middle East & Africa.

Total cigarette and heated tobacco unit shipment volume inched down 2.1% to 199.5 billion units. Cigarette shipment volume fell 5.9% to 183.5 billion units in the third quarter, while heated tobacco unit shipment volume of nearly 16 billion units surged 84.8% year over year.

Adjusted operating income inched up 0.9% to reach $3,184 million. On a like-for-like basis, after excluding currency, adjusted operating income went up 8% year over year. The metric rose 1.3% at constant currency (cc). However, adjusted operating margin contracted 40 basis points to 41.7%. Excluding currency, the metric declined 0.9 percentage points to 41.2%.

Region-Wise Performance

Net revenues in European Union increased 7.2% to $2,645 million. Revenues increased 11.2% at cc, courtesy of favorable pricing and volume/mix. Total shipment volume in the region inched up 1.5% to 50,712 million units.

In Eastern Europe, net revenues grew 15.6% to $899 million and rose 16.5% at cc. The upside can be attributed to favorable pricing. Total shipment volumes inched up 0.9% to 31,237 million units.

In Middle East & Africa region, net revenues declined 1.4% (flat at cc) to $1,127 million. Further, total shipment volumes contracted 2.5% to 37,582 million units.

Revenues in South & Southeast Asia rose 4.1% (up 2.8% at cc) to $1,246 million. The upside was driven by favorable pricing variance. Shipment volumes declined 7.6% to 42,362 million units.

Revenues from East Asia & Australia improved 7.4% (up 7.5% at cc) to $1,252 million, primarily on favorable volume/mix. Total shipment volumes increased 10.2% to 20,668 million units.

Finally, revenues from Latin America & Canada fell 37.2% (down 36.1% at cc) to $473 million. Moreover, total shipment volumes declined 13.8% to 16,943 million units.

Other Financials

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $6,507 million. Also, the company had long-term debt of $26,426 million and shareholders’ deficit of $9,155 million.

During the quarter under review, management raised the quarterly dividend from $1.14 per share to $1.17. This represents a hike of 2.6%. Accordingly, the company’s annualized dividend rate is at $4.68, up from the previous level of $4.56.
 
Guidance


Philip Morris reiterated its outlook for 2019. Adjusted earnings are expected to be $5.14. The view indicates growth of almost 6% from the year-ago quarter’s figure. Excluding the impacts of unfavorable currency of approximately 14 cents, earnings are projected to rise at least 9% to $5.28. The Zacks Consensus Estimate for 2019 is currently pegged at $5.20. Further, management expects effective tax rate for 2019 to be roughly 23%.



Price Performance

Shares of the company have declined 8.3% in the past three months compared with the industry’s fall of 9.8%.

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