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What Philip Morris Should Show Investors to Prove It Has Momentum

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Oct. 12 2016, Published 2:48 p.m. ET

Philip Morris International

Philip Morris International (PM), a leading US-based tobacco company, is set to announce its 3Q16 earnings on October 18, 2016, before the market opens. The company’s product portfolio consists of leading premium brands like Marlboro, Merit, and Virginia Slims, as well as big international brands like Bond Street, Chesterfield, Next, and L&M. The company markets its products outside the US.

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Stock performance

In 2Q16, Philip Morris posted EPS (earnings per share) of $1.15 on net revenues of $6.6 billion, excluding excise taxes. Analysts were expecting the company to post EPS of $1.20 on net revenues of ~$6.8 billion excluding excise taxes.

The fall in cigarette shipments and the strengthening of the US dollar led to 2Q16 declines in revenues and EPS. The fall in shipments was severely impacted in Asia, Latin America, and Canada. These factors caused Philip Morris’s share price to fall.

On October 11, 2016, Philip Morris was trading at $95.5, which is 7.3% lower than its 2Q16 earnings announcement on July 19, 2016.

Year-to-date performance

Since the beginning of 2016, Philip Morris’ share price has delivered 9.7% of returns. During the same period, Altria Group (MO) and Reynolds American (RAI) have returned 8% and 2.6%, respectively.

By comparison, the broader comparative index, the First Trust Morningstar Dividend Leaders Index Fund (FDL), has returned 13.7% year-to-date. FDL has 10.6% of its holdings invested in tobacco and cigarette companies.

Series overview

With 3Q16 results just around the corner, this pre-earnings series will focus on what you can expect from Philip Morris’s upcoming earnings release. We’ll cover analyst estimates on revenue, operating margins, and EPS. We’ll also look at the company’s valuation multiple and expected stock price over the next 12 months.

Let’s start with analyst expectations for Philip Morris’s 3Q16 revenue.

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