Investors have gotten a lot more confident about Philip Morris International (PM 0.12%) recently, as some of the difficulties that the company has faced appear to be waning. Not only has adverse currency movement paused, but Philip Morris is also seeing rising contributions from its portfolio of reduced-risk products, and promising market results in Japan have many convinced that the future for the tobacco giant is in alternatives to traditional cigarettes. As investors prepare for Thursday's first-quarter financial report, they're hoping to see a modest rise in revenue and earnings for the company, and they would also like signs that Philip Morris' overall strategy is still working.

With those thoughts in mind, now's a good time to look at Philip Morris International to see what's been happening with the company lately and whether it can keep moving forward.

iQOS platform packaging.

Image source: Philip Morris International.

Stats on Philip Morris International

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$6.47 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Data source: Yahoo! Finance.

What's next for Philip Morris International's earnings?

Investors have had mixed views on Philip Morris International's earnings prospects recently. They've cut their first-quarter projections by $0.10 per share, a dramatic drop. Yet they've actually boosted their full-year 2017 projections by the same amount, and even larger increases for 2018 point to long-term optimism. Moreover, the stock has done extremely well, climbing 18% since late January.

Philip Morris International's fourth-quarter results helped to stoke the optimism surrounding the international tobacco giant. Revenue climbed by 9%, nearly doubling what most investors were looking to see from the company, and net income soared by almost two-fifths from year-earlier levels. Success in Asia was key to Philip Morris' gains, and sales of its reduced-risk product line soared 60% as the iQOS heated-tobacco platform continued to gain traction. Traditional cigarette shipments were weak, but Philip Morris said that easing currency-related tensions would potentially boost its earnings throughout 2017.

Investors have truly focused their attention on innovation, seeing the early successes that Philip Morris has enjoyed in the reduced-risk space. At the end of March, Philip Morris continued to move forward in its efforts to support its long-term reduced-risk strategy by filing a premarket tobacco product application for the iQOS platform with the U.S. Food and Drug Administration. The company had already made a different FDA filing late last year, asking for approval under the FDA's modified risk tobacco product application framework. Yet Philip Morris believes that even if it can't convince regulators quickly about the advantages of iQOS compared to traditional cigarettes, it still might be able to get permission to commercialize the heated-tobacco product in the U.S. to get more exposure. With tests going so well in Japan, the opportunity to tap the U.S. market through its marketing agreement with Altria (MO -0.02%) has many investors excited about Philip Morris' growth prospects.

The other thing that shareholders are likely to focus on is whether Philip Morris makes any competitive response to the ongoing merger efforts of rival British American Tobacco (BTI -0.23%) with U.S. giant Reynolds American (RAI). Some believe that the move could spur Philip Morris to seek reunification with Altria, which was once Philip Morris' parent. Yet structuring the combination would be difficult, because the two companies have roughly equal market capitalizations and don't have the existing ownership position that BAT had in Reynolds. At this point, it might prove enough for Philip Morris to keep using its marketing and research partnership with Altria without going further with a corporate combination.

In the Philip Morris earnings report, be sure to pay attention to the fundamental performance that the tobacco giant sees in critical areas across the globe. With iQOS drawing so much publicity, Philip Morris investors need to remember that traditional cigarettes will still generate the vast majority of its business indefinitely into the future. That makes it crucial for Philip Morris to find ways to overcome obstacles rather than simply counting on reduced-risk products to pan out in the long run.