Philip Morris International Inc. (NYSE:PM) posted second quarter earnings that were below the expectations of analysts owing to the recent currency headwinds, says a report from Bloomberg. Net income for the world’s largest publicly traded tobacco company came in at $2.12 billion or $1.30 per share, a decline from $2.32 billion, or $1.36 from the corresponding period of last year. Analysts estimated earnings to come in at $1.41 per share.
Currency headwinds affected earnings
Philip Morris International Inc. (NYSE:PM) revenue is generated outside the United States due to which the earnings declined affected by a weakening of yen and other currencies in the second quarter. Due to the currency headwinds, profit for the second quarter declined 7 cents per share. The company expects that due to the currency impact, the second quarter profit will decline 31 cents, which is an increase over previously estimated 19 cents.
For the latest quarter, sales increased 2.2 percent to $20.5 billion. Revenue came down 2.5 percent to $7.9 after excluding excise taxes. According to the company, revenue should have increased 0.5 percent if currency movements had been favorable. Twelve currencies came down against the dollar in the second quarter, Australian dollar being at the top by 12 percent. Yen was the second currency to decline at 5 percent. Euro gained 1.5 percent.
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Philip Morris International Inc. (NYSE:PM) stock performance
Judy Hong, an analyst at Goldman Sachs Group Inc, said that foreign exchange was the primary reason for the decline in profits. She has maintained a Sell rating on Philip Morris shares.
Shares of Philip Morris International Inc. (NYSE:PM) were down 1.8 percent to $88.13 at 9:39 a.m. in New York. Yesterday the shares closed at $89.71 down 0.3 percent. In 2013, shares have surged 7.3 percent compared to an 18 percent increase in Standard & Poor 500 index.
Declining industry volume also pinched a bit
André Calantzopoulos, Chief Executive Officer of Philip Morris, said that pricing done by the company was good along with share performance. However, profit was impacted by the decline in industry volume in developing economies, timing of inventory movements in Japan and surging costs primarily in Asia.
For the remaining half of fiscal 2013, the company is expecting enhancement in the volume/mix, price will remain strong, and total cost variance will be flat after not including currency. One of the major challenges for the company will be industry volume, but it is expecting to meet the targeted EPS growth rate of 10-12 percent, in 2013.