Please ensure Javascript is enabled for purposes of website accessibility

The World Is Big Enough for Philip Morris

By Colleen Paulson - Updated Apr 6, 2017 at 11:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Philip Morris delivers earnings growth despite organic volume decline.

News flash: The world has not yet become a smoke-free zone.

Those who follow Philip Morris International (NYSE: PM) are fully aware that folks are still smoking in the U.S. and abroad. Volume growth may not be gangbusters, but like kissing cousin Altria (NYSE: MO), Philip Morris continues to succeed, as its fourth-quarter earnings indicate.

Fourth-quarter revenue increased by 4.8%. Gross profit grew by 8.8%, driven by a decline in cost of sales as Philip Morris continues a series of cost-reduction programs. Earnings per share increased by 20%, to $0.96, with a 15.1% increase in net earnings.

Overall cigarette volume grew by 3.1% for the quarter, but volume excluding acquisitions declined by 5.1%. Continuing on recent economic trends and excise tax increases, volume declined throughout the EU, Eastern Europe, the Middle East, and Africa. However, Asian volume grew by a whopping 24.1% and Latin American/Canadian volume increased by 2.4%, with acquisitions and trade inventory movement fueling growth.

Philip Morris indicated that global pricing power contributed toward quarterly revenue gains, attributing $580 million of quarterly revenue to pricing increases. Philip Morris isn't alone in levering price increases, and it would seem to have more pricing power than other consumer products companies.

Philip Morris International shareholders should feel confident right now. The stock price is lingering near its 52-week high. The company continues to increase quarterly dividends (bumping them by 10.3% last year), and we all know how important consistent dividend increases are as part of a long-term investing strategy. Philip Morris also bought back 18.6 million shares at a price of $1.1 billion during its fourth quarter as part of a three-year, $12 billion repurchase program.

British American Tobacco (NYSE: BTI), Reynolds American (NYSE: RAI), and Lorillard (NYSE: LO) are trying to make up ground on the Marlboro Man's buddies, Philip Morris USA (aka Altria) and Philip Morris International. But Marketing 101 principles tell us that a strong brand name still means something to consumers. Perhaps more importantly, though, the past few quarters have demonstrated that both the domestic and global Marlboro Men still know a thing or two about how to run a successful company.

For related Foolishness:

We Fools may not hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Colleen Paulson does not hold positions in any of the stocks mentioned in this article. Philip Morris International is a Motley Fool Global Gains pick. The Fool owns shares of Altria and Philip Morris International. For more investing strategies, take a look at the Motley Fool's newsletters via a 30-day free trial. The Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Altria Group, Inc. Stock Quote
Altria Group, Inc.
MO
$45.47 (-0.31%) $0.14
Philip Morris International Inc. Stock Quote
Philip Morris International Inc.
PM
$100.13 (-0.37%) $0.37
Reynolds American Inc. Stock Quote
Reynolds American Inc.
RAI
Lorillard, LLC Stock Quote
Lorillard, LLC
LO.DL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.