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Philip Morris’s 4Q17 Earnings: Important Takeaways

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Part 3
Philip Morris’s 4Q17 Earnings: Important Takeaways PART 3 OF 5

Philip Morris Fails to Meet Analyst Earnings per Share Estimates

4Q17 performance

In 4Q17, Philip Morris International (PM) posted EPS (earnings per share) of $0.44, which included an unfavorable impact of tax items of $0.88. However, removing special items, the company’s 4Q17 adjusted EPS stood at $1.31, which represents growth of 19.1% from $1.1 in 4Q17. The company’s 4Q17 earnings were lower than analysts’ estimate of $1.36.

Philip Morris Fails to Meet Analyst Earnings per Share Estimates

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EPS growth

Philip Morris’s 4Q17 EPS growth was driven by revenue growth and an expansion of net margins. Compared to 4Q16, the company’s net margins improved from 24.5% to 24.7% due to favorable pricing in all four segments and favorable volume/mix in European Union and Asia, which was partially offset by an unfavorable cost comparison due to increased investments on reduced-risk products in EU region. From the above graph, we can see that the company has failed to meet analysts’ EPS estimates in the last five quarters.

During the same period, Philip Morris’s peer, Altria Group (MO), posted adjusted EPS of $0.91, which represents growth of 33.8% from $0.68 in 4Q16.

Outlook

For 2018, Philip Morris’s management set the EPS guidance to a range of $5.20 to $5.35 under prevailing exchange rates, which represents growth of 34% to 38% from $3.88 in 2017. However, excluding the currency impact, the EPS are expected to rise in the range of 7% to 10% from $4.70 in 2017.

Analysts are expecting the company to post adjusted EPS of $5.37, which represents growth of 14.3% from $4.70 in 2017. The EPS growth is expected to be driven by revenue growth and expansion of margins.

Next in this series, we’ll look at Philip Morris’s valuation multiple.

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