Strong Third-Quarter Earnings Drove Philip Morris Stock Up

Third-quarter performance

Philip Morris International (PM) posted its third-quarter earnings on October 18. The company posted adjusted EPS (earnings per share) of $1.44 on revenues of $7.50 billion. Year-over-year, the company’s EPS grew by 13.4%, while its revenue increased by 0.4%.

Strong Third-Quarter Earnings Drove Philip Morris Stock Up

Stock performance

During the quarter, Philip Morris outperformed analysts’ EPS expectation of $1.28 and revenue expectation of $7.17 billion. The strong growth in heated tobacco unit sales helped the company outperform analyst sales estimates. The shipment volume of heated tobacco units grew in all regions except in East Asia & Australia where the net unfavorable estimated distributor inventory movements in Japan led to a fall in total shipment volume. Philip Morris’s strong performance in the third quarter appears to have increased investors’ confidence, leading to a rise in the company’s stock price. On October 18, the company’s stock price rose to a high of $89.34 before closing the day at $87.52, which represents a rise of 3.5% from its previous day’s closing price.

Year-to-date performance

Despite yesterday’s rise, Philip Morris is still trading 17.2% lower YTD (year-to-date). The increase in anti-tobacco regulations, a declining number of smokers, and rising competition in the RRP (reduced-risk products) space have been putting pressure on the company’s stock price.

During the same period, the stock prices of peers Altria Group (MO) and British American Tobacco (BTI) have declined 14.7% and 36.7%, respectively. Also, the stock price of the Consumer Staples Select Sector SPDR ETF (XLP) has fallen 6.0% YTD.

Series overview

In this series, we’ll analyze Philip Morris’s third-quarter performance and also compare it with analysts’ expectations. We’ll also cover management’s guidance for 2018 and analysts’ expectation for the next four quarters. Finally, we will end this series by looking at the company’s valuation multiple and analysts’ recommendations. First, let’s start by looking at the company’s third-quarter revenue.