Philip Morris Earnings: An Early Look

Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Philip Morris (NYSE: PM  ) . The cigarette giant has taken the power of its Marlboro brand across the world, capitalizing on a growing consumer class in emerging markets. Let's take an early look at what's been happening with Philip Morris over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Philip Morris

Analyst EPS Estimate	$1.22
Change From Year-Ago EPS	10.9%
Revenue Estimate	$8.03 billion
Change From Year-Ago Revenue	4.7%
Earnings Beats in Past 4 Quarters	3

Source: Yahoo! Finance.

Will Philip Morris keep smoking higher?
Analysts have barely budged on their opinions on Philip Morris, cutting their earnings-per-share estimate on the stock by a single penny over the past three months. Shareholders have been equally muted in their enthusiasm, with the share price rising less than 2% since early November.

The bullish argument for Philip Morris is essentially the same one on which it and former parent Altria (NYSE: MO  ) have executed successfully for decades. The company's impressive dividend yield, strong payout growth over time, and substantial buybacks all make the stock attractive to investors. Moreover, with emerging markets pulling in far more growth than the U.S. market, Philip Morris is avoiding many of the headwinds that domestically focused Altria, Lorillard (NYSE: LO  ) , and Reynolds American (NYSE: RAI  ) have had to deal with, including greater regulation and negative ad campaigns.

Yet Philip Morris hasn't gotten off scot-free on the regulatory front, as countries around the world start to follow the lead of U.S. regulators and impose their own restrictions on the company. Australia's cigarette-packaging policies have gotten the lion's share of attention so far, but you'll find similar pressures in several other countries to try to rein in tobacco companies in light of health concerns.

One thing investors need to look at in assessing Philip Morris' earnings is the relationship between earnings and dividend payments. With its payout ratio approaching 70%, Philip Morris needs to keep boosting earnings in order to support its attractive dividend policy. Given how comfortable investors have gotten with massive dividend growth in recent years, any slowdown in dividend increases could make investors think twice about adding to their positions, especially as multiples have expanded greatly in recent years.

Learn more
Get the whole story on Philip Morris' extraordinary growth since its spinoff by reading The Motley Fool's premium research report on the company, which includes more in-depth analysis of its opportunities and challenges ahead. To claim your report, along with a year's worth of analyst updates as key news develops, just click here now.

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