Philip Morris Sees Cigarette Shipments Continuing To Decline

Source from:  Seeking Alpha 07/23/2018

Summary

Philip Morris showed strong growth in the second quarter of 2018 compared to the prior year quarter.

The company continues to see cigarette volumes decline as rising excise taxes around the world make the vice ever more expensive for consumers.

This is forcing the company to rely on its heated tobacco products and these are delivering strong growth, but it needs to continue.

The company's management showed confidence in its future by hiking the dividend by 6.9% YOY to $4.65 per share.

While it can afford to pay the dividend based on the FCF in Q2, it is uncertain whether the company can maintain this FCF.

On Thursday, July 19, 2018, international tobacco giant Philip Morris International (PM) announced its second quarter 2018 earnings results. At first glance, the results appeared to be quite good, with the company beating the expectations of analysts on both its top- and bottom-lines. However, a deeper look at the earnings report shows a few worrying trends, which may have contributed to the decline that the stock suffered following the announcement.

As my long-time readers are no doubt well aware, it is my usual practice to share the highlights from a company's earnings report before delving into an analysis of its results. This is because these highlights provide background for the remainder of the article as well as serve as a background for the resultant analysis. Therefore, here are the highlights from Philip Morris International's second quarter 2018 earnings results:

Philip Morris International had net revenues of $7.726 billion in the second quarter of 2018. This represents an 11.7% increase over the $6.917 billion that the company brought in during the prior year quarter.

The company reported an operating income of $3.093 billion in the quarter. This is a 13.0% increase compared to the second quarter of 2017.

Philip Morris International had a total shipment volume of 201.708 billion items in the second quarter of 2018. This is a slight 0.9% increase compared to the second quarter of last year.

The company increased its dividend by 6.9% to an annualized rate of $4.56 per share.

Philip Morris International reported diluted earnings of $1.41 per share. This represents a 23.7% increase over the $1.14 per share that it had in the prior year quarter.  Enditem