Earnings Preview: Philip Morris Int'l Inc.

Source from:  Bloomberg Business 10/21/2010

Cigarette maker Philip Morris International Inc., which sells Marlboro and other U.S. brands abroad, reports its third-quarter results before the stock market opens Thursday. WHAT TO WATCH FOR: Whether fewer cigarettes sold in the wake of tax hikes and growing tobacco control efforts. Smokers face new tax hikes, bans, health concerns and social stigma worldwide, but the impacts are starkest in the United States. With offices in New York and in Lausanne, Switzerland, Philip Morris has compensated for consumers buying cheaper cigarettes -- and for the weak economy -- by cutting costs and raising its prices. Its market share has increased. Last quarter, Philip Morris International's volumes fell in the European Union but increased in Eastern Europe, the Middle East, Africa, Latin America and Canada. In Japan, consumers are bracing for a 40 percent tax hike this month. Analysts also expect the company's earnings to benefit from a weaker dollar. It had previously seen its revenues deflate as the stronger dollar shrank the profit it earned in other currencies. When the dollar is rising, companies that sell goods internationally and must convert revenue from foreign currencies usually take a hit in the dollar value of that revenue. That effect is particularly strong for Philip Morris International, because it does all its business overseas. WHY IT MATTERS: Philip Morris International is the world's second-biggest cigarette company after the state-controlled China National Tobacco Corp. Altria Group Inc. in Richmond, Va., owner of Philip Morris USA, spun off Philip Morris International in 2008. Altria is the largest U.S. cigarette seller. WHAT'S EXPECTED: Analysts polled by Thomson Reuters expect Philip Morris International to earn $1.01 per share on sales of $6.98 billion. LAST YEAR'S QUARTER: Philip Morris International reported net income of 93 cents per share on revenue of $6.59 billion. Enditem