Earnings Preview: Philip Morris Int'l to report 3Q

Cigarettes sold, market share and prices eyed as Philip Morris Int'l posts 3Q results Thursday

Associated Press

RICHMOND, Va. (AP) -- Cigarette maker Philip Morris International Inc., which sells Marlboro and other brands abroad, is expected to report higher profit and revenue when it releases its third-quarter results before the market opens on Thursday.

WHAT TO WATCH FOR: Whether cutting costs and raising prices continued to help Philip Morris International compensate for smokers buying fewer, or cheaper, cigarettes.

Smokers face new tax increases, bans and other tobacco-control efforts, as well as health concerns and social stigma worldwide, but the impact generally is less stark outside the United States.

Cigarette shipments fell about 4 percent to 228.9 billion cigarettes in the second quarter as Philip Morris International saw volume declines in all of its regions. Total Marlboro volumes fell nearly 6 percent to 72.4 billion cigarettes.

Still, the company gained share in key markets including France, Germany, Indonesia, Spain and the United Kingdom.

When the company released its second quarter results, changes in foreign exchange rates forced it to cut its 2013 profit guidance to between $5.43 and $5.53 per share, versus $5.17 per share in 2012. The forecast includes a one-year $300 million cost-saving target and planned share buybacks of $6 billion for 2013.

When the U.S. dollar is rising against the world's other currencies, companies that sell goods internationally take a hit when converting revenue in foreign currencies back into the dollar. That effect is particularly strong for Philip Morris International, because it does all its business overseas.

Analysts also will be interested to hear about the impact of the company's recent $625 million purchase of a 49 percent stake in Arab Investors-TA, giving it a nearly 25 percent interest in the Société des Tabacs Algéro-Emiratie, a joint venture between Arab Investors-TA and Algerian state-owned Société Nationale des Tabacs et Allumettes SpA. Philip Morris International views Algeria as a key region for possible future growth.

Investors are interested in the company's next-generation products. Philip Morris International has said it expects to launch the first of these products between 2016 and 2017, which could include one that heats tobacco in a cigarette with a controlled heating mechanism or an aerosol nicotine-delivery system.

WHY IT MATTERS: Philip Morris International, with offices in New York and in Lausanne, Switzerland, is the world's second-biggest cigarette company after state-controlled China National Tobacco Corp.

Richmond, Va.,-based Altria Group Inc., the owner of Philip Morris USA, spun off Philip Morris International in 2008. Altria is the largest U.S. cigarette seller.

WHAT'S EXPECTED: Analysts on average expect Philip Morris International to report earnings of $1.44 per share on revenue of $7.94 billion, according to FactSet. Analysts typically exclude one-time items.

LAST YEAR'S QUARTER: Philip Morris International reported net income of $1.38 per share on revenue of $7.9 billion, excluding excise taxes.

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Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .

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