Philip Morris International Inc. (PM) posted 2010 first-quarter results before the opening bell on Thursday. The company recorded a 15.4% growth in net income to $1.7 billion from $1.5 billion in the prior year quarter. However, adjusted earnings per share of 90 cents missed the Zacks Consensus Estimate of 93 cents as performance was affected by higher excise taxes and macroeconomic headwinds in the Baltics, Romania, Turkey and Ukraine. Shares of Philip Morris have slipped more than 3% in pre-market trading on the New York Stock Exchange.
Net revenues during the quarter grew 16.1% to $6.5 billion from $5.6 billion in the year-ago period, primarily due to favorable currency translations and pricing across all business divisions. However, overall growth in revenues was partially offset by unfavorable volume mix, primarily in the EU region and Japan. Excluding the impact of currency and acquisitions, organic revenues posted a growth of 6.1%, mainly due to favorable pricing.
In the reported quarter, cigarette shipment volume rose slightly by 0.7% year-over-year to 205 billion units, chiefly driven by an 11.4% growth in Asia as Philip Morris witnessed strong performance in Indonesia, Korea and Philippines. Volume in Latin America and Canada also rose 4.4%, primarily due to growth in Canada, Colombia and Mexico. However, overall volume growth was partially offset by declines in the EU and EEMA (Eastern Europe, Middle East & Africa) regions.
On an organic basis (excluding acquisitions), cigarette shipment volume recorded a decline of 2.3%. Shipments of Marlboro slipped 0.6% primarily due to declines in the EU and EEMA, partially offset by growth in Asia − especially Korea and the Philippines − and in Latin America & Canada. Shipments of L&M decreased 6.3% in the quarter, while shipments of Chesterfield and Parliament brands posted declines of 11.7% and 11.6%, respectively.
During the quarter, Philip Morris’ gross margin contracted 83 basis points (bps) to 26.5%, while operating margin dipped slightly by 4 bps to 17.4%.
Concurrent with the earnings release, Philip Morris also reaffirmed its guidance for 2010. The company continues to expect full-year earnings to be in a range of $3.75 to $3.85 per share, at the prevailing exchange rates. Excluding currency, earnings are expected to increase by approximately 10%−13%. The guidance is in line with the Zacks Consensus Estimate of $3.84 per share, which has edged up a penny over the past month as 2 of 13 covering analysts raised expectations while 2 moved in the opposite direction.
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