The world's largest publicly traded tobacco company, Philip Morris International (PM), reported upbeat second-quarter 2014 results, exceeding our estimates on both the top and bottom lines. A pickup in European sales led by favorable volume/mix in Italy and favorable pricing in Germany and Poland enabled the company to beat estimates.
Q2 Earnings in Focus
Adjusted earnings per share jumped 8.5% year over year to $1.41, beating the Zacks Consensus Estimate by 13.7%. Though revenues dropped 1.5% year over year to $7.8 billion, they came in ahead of our estimate of $7.7 billion (read: Top ETF Picks for Q2 Earnings Season).
European sales jumped 8.5% year over year. However, unfavorable currency movements and slumping volumes in Asia were the primary factors for the fall in revenue.
The company, however, is facing a tough time given the struggling macroeconomic environment in the European Union, rising illicit trade in Asia, costs related to restructuring and higher excise taxes.
In the face of a softening tobacco business, the company has been planning new investments in order to diversify its product portfolio (read: Consumer Staples ETFs in Focus on Philip Morris Stock Slide).
Last month, the company had reduced its earnings per share (ETF:EPS) forecast for 2014 from a range of $5.09 to $5.19 to a new range of $4.87 to $4.97. For 2015, Philip Morris expects adjusted earnings growth in the range of 8–10%.
ETF Impact
In spite of the company beating estimates, a muted outlook has caused its share price to trade down slightly on the day of the earnings ...
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