How Will Philip Morris Sales Look Next Year?

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Philip Morris International Inc. (NYSE: PM) addressed investors Wednesday morning at the Morgan Stanley Global Consumer & Retail Conference in New York.

The company reaffirmed that its 2014 full-year forecast for earnings per share (EPS) would be within the range of $4.76 to $4.81, compared to $5.26 in 2013. However, on an adjusted basis, EPS is expected to increase in a range of 6.5% to 7.5% from $5.40 in 2013.

There is an after-tax charge of $0.02 per share, which combines an asset impairment exit cost of $0.01 per share in the first quarter and an expected $0.01 per share in the fourth quarter. These costs stem from the discontinuation of cigarette production in Australia by the end of 2014. Additionally, there was an after-tax charge of $0.25 per share for asset impairment and exit costs from discontinuing cigarettes in the Netherlands in 2014.

There also was an unfavorable currency impact, at prevailing exchange rates, of roughly $0.72 per share for the full year 2014.

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For 2015, Philip Morris previously disclosed that it targets annual growth rates, on a currency-neutral basis, of:

  • Net revenues 4% to 6%
  • Adjusted operating companies income 6% to 8%
  • Adjusted diluted EPS 8% to 10%

Looking ahead to 2015, at prevailing exchange rates, an unfavorable currency impact would approach roughly $0.60 per share.

For the 2014 full year, the company expects that cigarette volume will decline by 2.9%, excluding China and the United States. Additionally, Philip Morris expects that international cigarette industry volume will revert to its historical decline rate of between 1% and 2% in the “foreseeable future.”

Philip Morris says that in the future it will aim to return around 100% of its free cash flow to its shareholders through dividends and share repurchases. Since 2008, the company has increased its dividend by 117.4% to an annualized rate of $4.00 a share.

It is worth noting that there are more smokers (42.1 million in 2012, according to the Centers for Disease Control) in the United States than there are heavy drinkers. Nearly half a million Americans annually — 1,300 every day — die from the effects of smoking cigarettes. Tobacco use costs the United States about $289 billion a year in direct medical care and lost productivity.

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Shares of Philip Morris were down less than 1% to $86.86 in the first two hours of trading Wednesday. The consensus analyst price target is $87.27, and the 52-week trading range is $75.28 to $91.81.