Philip Morris International Inc. (PM) reported adjusted fourth-quarter 2013 earnings per share of $1.37, in line with the Zacks Consensus Estimate. However earnings were higher than the prior-year quarter earnings by 10.5%.
Earnings were on the upswing owing to positive pricing and lower shares due to buyback. Excluding an unfavorable currency impact of 11 cents, earnings of $1.53 exceeded the prior-year quarter earnings by 19.4%.
Revenues and Margin
Net revenue went down by 1.3% to $7.8 billion. However, it beat the Zacks Consensus Estimate of $7.7 billion by 1.3%. Excluding the impact of an unfavorable currency translation, net revenue increased roughly 2.5% from the prior-year quarter, mainly driven by favorable pricing.
During the quarter, net revenue in the European Union (EU) climbed 3.7% (down 0.4% excluding currency) from the prior-year quarter to $2.1 billion predominantly reflecting a lower total market, notably in Germany, Italy and Spain.
Net revenue in the Eastern Europe, the Middle East & Africa (EMEA) region stood at $2.3 billion, up 5.5% (up 7.9% excluding currency) from the prior-year quarter fuelled by driven by favorable pricing of $196 million, principally in Russia and Ukraine.
Asia recorded net revenue of $2.5 billion, down 11.7% (down 2.2% excluding currency) from the prior-year quarter due to unfavorable volume/mix primarily in Japan and Philippines.
In Latin America and Canada, revenues went up 4.0% (up 11.5% excluding currency) to $917 million in the quarter due to favorable pricing in Argentina, Canada and Mexico.
Philip Morris' quarterly gross profit declined 0.4% from the prior-year quarter to $5.2 billion, mainly due to higher excise tax faced by the company during the quarter. Operating income slipped 1.1% year over year to $3.2 billion during the quarter due to higher marketing, administration and research costs.
Fiscal Results
For fiscal 2013, adjusted earnings per share of $5.4 were inline with the Zacks Consensus Estimate. Earnings, however, exceeded the prior-year results by 3.4%.
Net revenue went down by 0.5% to $31.2 billion, in line with the Zacks Consensus Estimate, Excluding the impact of an unfavorable currency translation, net revenue increased roughly 1.9% from the prior-year quarter, mainly driven by favorable pricing.
Financial Update
During the quarter, Philip Morris spent $1.5 billion to repurchase 16.7 million shares.
Guidance
Management expects its GAAP earnings to be in the range of $5.02 to $5.12 in fiscal 2014 versus $5.26 in 2013. The company expects currency impact of 71 cents per share for 2014. Excluding the currency impact, the company expects its earnings to increase by approximately 6% to 8% from adjusted earnings of $5.40 in 2013.
Philip Morris carries a Zacks Rank #4 (Sell). Other diversified retailers worth considering include Reynolds American Inc. (RAI) and Lorillard Inc. (LO), which carry a Zacks Rank #2 (Buy).
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