October 21, 2009 - Cigarette maker Philip Morris International Inc. (PMI) is scheduled to report third-quarter results Thursday, October 22nd.
The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Philip Morris International — which sells Marlboros, L&M, Parliament and Virginia Slims outside the U.S. and has offices in Lausanne, Switzerland, and New York — is aggressively pursuing growth in emerging markets, while consumers in Europe are buying fewer cigarettes.
The company said in July that its second-quarter profit fell 9 percent as the stronger dollar sank profit earned in other currencies. The stronger dollar has hurt many companies that have large overseas businesses.
Most U.S. companies that sell goods internationally convert those sales from foreign currencies into dollars when they report their financial results. If the dollar strengthens relative to those currencies, revenue in those currencies translates into fewer dollars.
Philip Morris International is the world's second-biggest cigarette maker after the state-controlled China National Tobacco Corp. It was spun off in 2008 from Richmond, Va.-based Altria Group Inc., owner of Philip Morris USA.
BY THE NUMBERS: Analysts surveyed by Thomson Financial on average expect Philip Morris International to post a profit of 89 cents per share for the third quarter on revenue of $6.71 billion. During the third quarter a year ago, the company earned $1.01 per share on revenue of $6.57 billion.
ANALYST TAKE: Credit Suisse analyst Thilo Wrede wrote in an Oct. 13 investor note that cigarette volume declines are still expected to decline and consumers to continue trading down in Eastern Europe. In western Europe, Canada and Japan volume declines are being offset by higher pricing, Wrede wrote.
Stifel, Nicolaus & Co. analyst Christopher Growe said in an Oct. 19 note to investors that while volumes will decline, he expects net sales to grow on higher pricing and cost cutting.
WHAT'S AHEAD: Wall Street will be watching the impact of recent acquisitions, exchange rates and sustainability of global tobacco consumption.
Philip Morris International finalized a deal in September to buy Swedish Match's South African snuff and pipe tobacco operations for roughly $222 million. Swedish Match South Africa Ltd. accounted for about 31 percent of total tobacco consumption in South Africa.
The companies are already partners in a joint venture to sell Swedish Snus and other smokeless tobacco products in markets outside the U.S. and Scandinavia. Tobacco makers have been seeking more smokeless products as demand for cigarettes has been threatened by smoking bans, higher taxes, health concerns and social stigma.
Philip Morris International also has said it would pay $452 million to buy privately owned Protabaco, a Colombian maker of Mustang, Premier and President cigarettes.
Meanwhile, the company is combating tobacco product display bans and has filed a lawsuit challenging an Irish display ban. There also are bans in Iceland and certain Canadian provinces.
Reefrence: Earnings Preview: Philip Morris International Inc. by MICHAEL FELBERBAUM, Associated Press, 10/20/2009.