2017 wasn't the best of years for Philip Morris International (NYSE:PM), as the tobacco giant's stock lagged behind the overall market's big gains. Yet even as the company put another year behind it, Philip Morris has high hopes that 2018 will bring much better news, both in raw financial numbers and in the favorable trends that will produce much-needed growth.

Coming into Thursday's fourth-quarter financial report, Philip Morris investors wanted to see healthy gains in key metrics along with a good outlook for the coming year. The Marlboro maker didn't quite give investors everything they wanted, but the results were still encouraging after a long period of tough industry conditions. Let's take a closer look at Philip Morris International and what it said about the end of 2017.

Glass building with Philip Morris logo on it, next to an empty street.

Image source: Philip Morris International.

Philip Morris gets some growth

Philip Morris International's fourth-quarter results perked up in some ways from what we've seen in past quarters. Revenue net of excise taxes jumped 19% to $8.29 billion, which was even better than the healthy 17% growth rate that most of those following the stock had expected to see. GAAP net income took a hit due to one-time issues, but after making appropriate allowances for those items, adjusted earnings of $1.31 per share jumped 19% from year-ago figures, even though it fell short of the consensus forecast for $1.35 per share.

Tax reform took a heavy toll on Philip Morris during the quarter. The company said that new tax laws reduced net income by $1.6 billion. Most of that was from the one-time tax on foreign earnings, but remeasurement of deferred tax assets and liabilities added a bit to the burden. Overall, tax reform cost the company $0.88 per share on its bottom line.

Beyond that, some encouraging signs emerged during the quarter. Total shipment volumes actually rose from year-earlier figures by nearly 4%, breaking a long string of sometimes extreme declines. Cigarette shipments still did fall, but the 2% rate was quite a bit gentler than investors have seen in past quarters, and strength in the European Union market resulted in volume gains there. The Marlboro brand saw slight declines from year-earlier periods, but big boosts in sales of Chesterfield and the namesake Philip Morris brand made up for big drops in L&M, Bond Street, and Lark.

Most of the volume gains were attributable to iQOS heated tobacco sales. Unit volume jumped more than fourfold to 15.7 billion units, predominantly in Asia, where the Japanese market has gotten out to a terrific start. Yet Philip Morris sold about 1.7 billion units elsewhere, with ramp-ups starting to take shape worldwide.

From a revenue perspective, the European Union again was instrumental in pulling Philip Morris higher in the combustible products arena. Lower cigarette-related results in Eastern Europe and Asia weighed on performance, although the smaller Latin American market did well, and reduced-risk product sales in Asia helped make it the most successful grower on an all-product basis. All four regions saw operating company income rise, with Asia leading the way thanks to a 54% jump that brought overall operating income higher by more than 25%.

What's ahead for Philip Morris?

CEO Andre Calantzopoulos was happy with how things went and sees better times ahead. "A strong fourth-quarter performance helped drive robust full-year results," Calantzopoulos said, "exemplified by currency-neutral double-digit adjusted earnings-per-share growth, despite previously disclosed challenges in Russia and Saudi Arabia." The CEO also noted that iQOS has done extremely well and justified its investment.

Looking ahead, Philip Morris is optimistic. In Calantzopoulos' words, "For the first time since 2011, we have entered the year with annual guidance that reflects a positive currency impact." The company expects earnings of between $5.20 and $5.35 per share, which is about 7% to 10% higher than the adjusted earnings figures that Philip Morris put up in 2017.

Philip Morris shareholders were generally pleased with the news, and the stock climbed 1.5% on Thursday following the announcement. Investors are hopeful that Philip Morris has finally gotten through its roughest patch and will be able to produce more impressive growth in the months to come.

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