Philip Morris International (PM), a leading US-based tobacco company, announced its 4Q16 results on February 2. The company reported adjusted EPS (earnings per share) of $1.2 on revenue of $6.97 billion. As compared to 4Q15, PM’s EPS grew 35.8%, while revenue grew 9.1%.
Analysts were expecting the company to post EPS of $1.13 on revenues of $6.7 billion. The surge in its Reduced-Risk Products helped the company outperform analysts’ revenue estimates. However, unfavorable currency exchange lowered the company’s 4Q16 EPS, which was negatively impacted by $0.13.
For 2017, the company has set its EPS guidance in the range of $4.7–$4.85 at the prevailing exchange rate, which was in line with analysts’ estimate of $4.72. The better-than-expected 4Q16 sales and 2017 EPS guidance appear to have increased investors’ confidence, leading to a rise in the stock price.
On February 3, 2017, Philip Morris was trading at $101.11, which represents growth of 5.4% since the announcement of the 4Q16 earnings.
Calendar 2016 was a not a good year for Philip Morris. The company’s stock returned only 5.2%. However, 2017 started on a brighter note. YTD (year-to-date), the company’s stock has returned 10.5%. During the same period, peers Altria Group (MO) and Reynolds American (RAI) have returned 5.7% and 7.8%, respectively, YTD.
By comparison, the broader comparative index, the First Trust Morningstar Dividend Leaders Index ETF (FDL), returned 1.1%. FDL has 12.1% of its holdings in cigarette and tobacco companies.
In this series, we’ll examine Philip Morris’ 4Q16 performance and explore the factors that could drive the company’s revenue, margins, and EPS going forward. We’ll also look at the company’s valuation multiple as well as analysts’ estimates and recommendations.
Let’s start by looking at Philip Morris’s 4Q16 revenue.