We are primarily concerned about Philip Morris’ declining shipment volume as the tobacco industry is facing pressure due to stricter anti-smoking campaigns, higher excise tax and gasoline prices. Governments across the world are imposing higher taxes, forcing companies to increase prices. These tax increases are forcing the company to raise prices of both their premium as well as low priced products.Philip Morris International is the producer of Bond cigarettes and Cheapest Chesterfield cigarettes.
In the backdrop of a sluggish economy, repeated price increases negatively affected volume as well as margins of the company.
Meanwhile, we are encouraged by PM’s takeover of 100% stake in its Mexican tobacco business in Jun 2013, is also expected to boost international sales.
Earnings Whispers?
Our proven model does not conclusively show that Philip Morris is likely to beat earnings this quarter.
Negative Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) of Philip Morris, which represents the difference between the Most Accurate estimate ($1.39) and the Zacks Consensus Estimate ($1.41), is -1.42%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Philip
Morris’ Zacks Rank #3 (Hold) lowers the predictive power of ESP because
the Zacks Rank #3 when combined with a negative ESP makes surprise
prediction difficult. We caution against stocks with Zacks #4 and #5
Ranks (Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions
momentum.
Other Stocks to ConsiderHere are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
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