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Will Philip Morris Outperform Analysts’ Estimates in 4Q17?

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Analysts’ expectations

For 4Q17, analysts are expecting Philip Morris International (PM) to post EPS (earnings per share) of $1.35, which represents growth of 22.7% from its $1.1 in 4Q16. The EPS growth is expected to be driven by revenue growth and the expansion of net margins.

Analysts expect Philip Morris’s net margins to expand from 24.5% to 25.6%. The expansion is supposed to be driven by a lower cost of sales, a decline in SG&A (selling, general, and administrative) expenses, and lower D&A (depreciation and amortization) expenses. Compared to 4Q16, the cost of sales is expected to fall from 36.1% to 34.8%, SG&A expenses are expected to fall from 25.9% from 26.4%, and D&A expenses are expected to fall from 2.8% to 2.5%.

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Peer comparisons and outlook

For the same period, analysts are expecting Altria Group (MO) to post EPS of $0.80, which represents growth of 18.0% from $0.68 in 4Q16.

For the next four quarters, analysts expect Philip Morris to post EPS of $5.22, which represents growth of 16.3% from $4.49 in the corresponding four quarters of the previous year.

Dividends

On December 7, Philip Morris announced dividends of $1.07 per share, which represents a payout ratio of 90.3% and a dividend yield of 3.97%, given the company’s stock price of $107.94 as of December 30. For 2017, the company has paid dividends of $4.22, which represents growth of 2.4% from $4.12 in 2016.

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

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