Philip Morris International's share price hit as the tobacco giant chokes on earnings below analyst expectations

Francesca Washtell
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The Marlboro maker missed analyst expectations in its results today (Source: Getty)

Big Four tobacco firm Philip Morris International's (PMI) share price was down almost four per cent on the New York Stock Exchange after it missed analyst expectations in its second quarter results today.

The figures

The Marlboro maker's cigarette shipment volume fell 4.8 per cent compared to the second quarter of last year, to 209.3bn units. This was driven by declines in markets such as Russia, Japan, Pakistan and the Philippines.

Although PMI's net revenues were up 1.5 per cent at $19bn (£14.3bn), the company's operating income dropped 4.8 per cent to $2.8bn.

Net revenues for the year to date were down 0.8 per cent at $35.8bn, while overall cigarette shipment volumes for the first half were down 3.2 per cent, reaching 405.3bn units.

Read more: Philip Morris snaps up UK-based e-cigarette manufacturer Nicocigs

Earnings per share (EPS) for the second quarter missed analysts' estimates by $0.05. Diluted earnings per share reached $1.15, also down by $0.06 on the second quarter of 2015.

PMI said currency headwinds have continued to hit profits but are improving. The company has raised its EPS forecast to a range of $4.45 to $4.55 on a reported basis, up from $4.40 to $4.50 a share previously. ‚Äč

The company's share price was down almost four per cent to 98.93 cents in early US trading.

Why it's interesting

PMI, which has been smoking out new ways to make money with e-cigarettes in a changing tobacco products market, said a highlight of the second quarter was the "exceptional" performance of its iQOS e-cig in Japan. HeatSticks reached a national share for the quarter of 2.2 per cent, the company said today, which demonstrates the "tremendous potential" of the reduced-risk products category.

The firm registered revenue growth in the European Union market of 4.6 per cent in the second quarter, though posted falls in Eastern Europe, Middle East and Africa, Asia and the Americas.

In the EU, PMI lost a legal challenge in May brought forward in conjunction with British American Tobacco to soften new rules brought in by the organisation's Tobacco Products Directive. The legislation has clamped down hard on e-cigarette advertising and innovation, as well as banning menthols and smaller packets of traditional ("combustible") cigarettes.

Read more: Here's what cigarette packaging now looks like

It also announced it would not launch another legal challenge in May, this time against the domestic plain packaging legislation that now applies to all cigarette packets manufactured for sale in the UK.

What PMI said

PMI chief executive officer Andre Calantzopoulos said:

Although our second-quarter results were generally in line with our expectations, our cigarette shipment volume was particularly impacted by declines in low-margin geographies. Nevertheless, we remain fully on track to deliver our full-year guidance, revised today for improving currency, which continues to represent a currency-neutral adjusted diluted EPS growth rate of approximately 10 per cent to 12 per cent versus 2015.

As previously communicated, we expect the growth to be skewed towards the second half of this year, and the fourth quarter in particular.

In short

PMI has missed out this time around, though the fourth quarter in particular could be its saving grace for the year.

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