Since Altria (NYSE: MO ) originally spun off Philip Morris International (NYSE: PM ) , and Altria lays claim to the Marlboro Man's original U.S. market, it'd make sense to think of Altria as PMI's older sibling.
By that analogy, picture PMI as the quicker, bigger, stronger, better-looking younger sibling that gets all the attention -- and steals its older brother's girlfriends.
For proof of this lopsided relationship, look no further than the companies' respective second-quarter earnings reports. Altria's bottom line posted a 6% year-over-year increase that did not wow investors. But PMI delivered a 34% jump in adjusted diluted earnings per share, for a total of $1.34. Analysts expected just $1.22 in per-share profit for the quarter. Consider them sufficiently wowed.
Looking past the smoke
At the risk of underplaying PMI's very good quarter, Fools should recognize that some of that growth came from currency translation. Excluding that, adjusted diluted earnings per share increased 21% -- still not shabby in the least.
With the exception of Asia, much of the quarterly growth came from pricing increases and favorable product mix. Weak economies like Greece and Spain hurt overall volume, while the company lost market share in some areas such as Ukraine. It also had to cease business altogether in Libya because of import sanctions.
A breakdown of the regional results reveals Asia as the quarter's big driver:
Operating Company Income
|Eastern Europe, Middle East & Africa
|Latin America & Canada
Source: Philip Morris International.
Note: All numbers are year-over-year increases excluding currency impact.
Considering that three of its four regions saw volume declines, it's a serious tribute to the Asian market that the company managed to keep total volume roughly flat from last year. And of course, it's even more impressive that PMI was able to grow revenue and profits so dramatically on basically no volume growth.
But here's the real kicker
Investors frowned on Altria's quarter because the company said that sales would likely slow in the third quarter, as customers worked off built-up inventory. Not so with PMI.
Philip Morris International boosted its 2011 full-year forecast to $4.70 to $4.80, which, at the midpoint, is above current analyst estimates. That's a $0.15 increase from the company's prior forecast and while $0.05 of that is coming from currency translation, $0.10 will come from "improved business outlook." That sounds darn good to me.
Do you really have to choose?
PMI is larger than Altria, has much better geographic diversity, and has a brighter growth outlook. However, Altria's stock is currently cheaper on a price-to-earnings basis and has a better dividend yield. Just because the company split itself up, I don't think you have to choose one or the other for your portfolio -- I see both managing good returns in the years ahead.