Will Philip Morris Beat Earnings Estimates?

Zacks

Philip Morris International Inc. (PM) is set to report 2Q13 results on Jul 18, 2013, before the opening bell. Last quarter it posted a 4.4% negative surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

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.

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 Consider

Here 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:  

  • Reynolds American Inc. (RAI), Earnings ESP of +2.41% and a Zacks Rank #1 (Strong Buy)
  • Sanderson Farms Inc. (SAFM), Earnings ESP of +17.11% and a Zacks Rank #1 (Strong Buy)
  • Tyson Foods Inc. (TSN), Earnings ESP of +13.79% and a Zacks Rank #2 (Buy)
Read the Full Research Report on PM

Read the Full Research Report on RAI

Read the Full Research Report on TSN

Read the Full Research Report on SAFM

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