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Will Philip Morris’s 3Q17 Earnings Beat Analysts’ Estimates?

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Part 3
Will Philip Morris’s 3Q17 Earnings Beat Analysts’ Estimates? PART 3 OF 6

Why Analysts Expect Philip Morris’s Net Margins to Rise in 3Q17

3Q17 margins

In 3Q17, analysts expect Philip Morris International (PM) to post gross margin, EBITDA1 margin, and net margin readings of 64.5%, 45.6%, and 28.1%, respectively. In 3Q16, these margins were 65.2%, 42.6%, and 27.8%, respectively.

Why Analysts Expect Philip Morris’s Net Margins to Rise in 3Q17

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Factors that could impact PM’s net margin

Compared to 3Q16, analysts expect Philip Morris’s 3Q17 net margin to rise 0.3% due to growth in sales of higher margin RRPs (reduced-risk products) and increased product prices. 

However, some of the growth is expected to be offset by increased investments to support RRPs and higher effective tax rates. Analysts expect the company’s effective tax rate to be 27.9% in 3Q17 compared to 27.7% in 3Q16.

Peer comparisons

During the same period, analysts expect Altria Group (MO) to post gross margin, EBITDA margin, and net margin readings of 62.5%, 51.7%, and 32.6%, respectively. In 3Q16, the company’s margins were 60.7%, 45.9%, and 31.0%, respectively.

Outlook

For the next four quarters, analysts expect Philip Morris to post gross margin, EBITDA margin, and net margin readings of 64.9%, 43.4%, and 26.3%, respectively. In the corresponding quarters of 2016, these margins were 64.3%, 42.7%, and 26.2%, respectively.

Next, we will look at analysts’ earnings estimates for 3Q17.

  1. earnings before interest, tax, depreciation, and amortization
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