Philip Morris Cigarette Shipments Fall 3.5%, Profits Tumble 13%

Currency translation effects cost the company $1.22 billion in quarterly revenues. Operating income totaled $5.8 billion, down 13.4% year-over-year.

The company forecast full year EPS in a range of around $5.72 to $5.83, compared with a full-year 2013 EPS of $5.40. The forecast includes a $0.61 per share reduction due to currency exchange rates and a charge of $0.25 per share related to the closing of Philip Morris plants in Australia and the Netherlands. The consensus estimate had called for full-year EPS of $5.14 on revenues of $29.91 billion.

The company’s CEO noted:

For the second half of this year, we anticipate more challenging quarterly comparisons, particularly in the fourth quarter — which, in 2013, saw currency-neutral adjusted diluted earnings per share grow by 19.4% — due to known business challenges, particularly in Asia, the timing of investments behind the commercialization of our Reduced-Risk Products and the roll-out of Marlboro Red 2.0, as well as costs related to our manufacturing footprint optimization initiatives.

Philip Morris pays a quarterly dividend of $0.94 for a dividend yield of 4.1%. The company also repurchased 11.6 million shares of its own stock in the second quarter at a cost of $1 billion. Philip Morris plans to spend $18 billion on share repurchases in a three-year program that began in the third quarter of 2012. So far the company has spent $11.1 billion on share buybacks.

The proposed merger between Lorillard Inc. (NYSE: LO) and Reynolds American Inc. (NYSE: RAI) will create a stronger competitor to Philip Morris internationally, as well as to the domestic seller of Marlboro cigarettes, Altria Inc. (NYSE: MO).

The company’s shares traded up about 1.1% at $85.50 in Thursday’s premarket session. The stock’s 52-week range is $75.28 to $91.81. Thomson Reuters had a consensus analyst price target of around $88.70 before this report.

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