Philip Morris International's sales aren't smokin'
In addition to sliding shipments at the tobacco giant, it's not joining the rush to develop e-cigarettes.
Net income at the company, which has dual headquarters in New York and Switzerland, fell 8.3% to $2.12 billion, or $1.30 a share, from $2.32 billion, or $1.36 a share, a year earlier, as the strength of the U.S. dollar hurt profits. That was below the $1.41 a share analysts had expected. Sales fell 2.9% to $7.9 billion, below estimates of $8.17 billion. It also slashed its profit forecast for the year.
When the effects of currencies are excluded, Philip Morris International -- which sells only outside the U.S. after being spun off by Altria (MO) in 2008 -- reported operating profit gains of 2.6% in Eastern Europe, the Middle East and Africa, and a 5.6% jump in business in Latin America and Canada. The European Union and Asia saw declines of 2.6% and 5.6%, respectively.
Overall, global shipments fell 3.9% to 228.9 billion units, indicating that the public continues to take messages about the health dangers of smoking to heart. Fewer young people are taking up the habit as well. The percentage of 8th, 10th and 12th graders in a recent U.S. government survey who reported they started smoking was at its lowest recorded level.
Philip Morris is sitting on the sidelines of the e-cigarette market, which is attracting other companies, including former parent Altria. E-cigarette supporters argue that they're healthier than conventional smokes, a claim that public health advocates dispute.
"Years from now, the situation may be different. But today I don't think that the product is performing well on the taste side," said Philip Morris chief financial officer Jacek Olczak during the company's earnings conference call.
Investors may find Philip Morris' stock more satisfying than its smokes. Although it trades at a five-year-high price-to-earnings multiple of 17.23, Wall Street thinks the stock has room to run. Analysts' average 52-week price target on the stock is $98.80, about 10% higher than where it currently trades. The company also pays a fat dividend yielding 3.8%, which may interest investors who have no qualms about owning a "sin" stock.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
I finally realized and admitted my ignorance more than a dozen years ago and bought the old cash cow, Phillip Morris .
Since then it is spun of several pups that leave me with a total of five companies in my portfolio from one original purchase. What a great world it is to live in.
If people want to smoke, so be it. When you get a grip and realize that idiots will be idiots, why not profit from their mindset.
PM is a great asset.
Actually this is wonderful news !! Hopefully big tobacco will continue to loose sales and stop poisoning us with tobacco! Its sad to see kids smoking and making the same mistakes I made when I started to smoke. Once I started I couldn't quit and was a slave to these big tobacco companies giving my hard earned money away. I smoked these cancer sticks for many years until I tried an electronic cigarette. The day I used an e-cig was the last I ever smoked a real cigarette. YAE!! Its been 3 years now and love my Joyetech e-cigs (They are the best in the industry). Route66Vapor is where I got mine from, a great company BTW, but there are other companies as well located in the USA!
ECigs aren't the wave of the future, they are here! I have been smoking my entire adult life, and I am proudly cigarette free. I can't even remember the last time I bought cigarettes. The taste? No comparison. Cigarettes taste like burnt leaves now (ha, ha), compared to the hundreds of really good flavors out there on the market. I am currently enjoying Java, and it tastes so good it puts my actual coffee to shame. I can breathe easier, my clothes, car, and home don't stink and I don't have to clean out the ashtray or stand in the alienated but sanctioned smoking area at work anymore. Cigarettes are out in a big way. Still waiting to see what happens with the FDA, but all ingredients involved are FDA-approved and there’s too many good reasons to keep this trend going until ultimately Big Tobacco will only have overseas sales because anyone with a set of lungs in the US who wants to keep them will already have switched!
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