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Philip Morris surprises Wall St with Q2 earnings growth, hiked guidance

Tobacco giant Philip Morris (NYSE: PM) surprised Wall Street by reporting growth in earnings in the second quarter. Adjusted net income grew 3.5% to $1.46 per share, even as analysts were expecting a decline. The company also raised its 2019 full-year EPS guidance.

Q2 revenues edged down 0.3% to $7.7 billion, hurt by currency headwinds. However, this still came in above the analysts’ estimate of $7.4 billion. Without the impact of currency, net revenues improved 5.4% year-over-year.

philip morris surprises by reporting a growth in Q2 EPS

Following the better-than-expected results, PM shares gained 1.8% during pre-market trading on Thursday. The stock has gained 21% so far this year.

Cigarette and heated tobacco unit shipment volume was down by 1.4% during the quarter. Individually, cigarette shipment volume declined 3.6%, while heated tobacco unit shipment volume was up 37%.

Outlook raised

The company said it currently expects full-year 2019 reported EPS of at least $4.94, compared to the earlier projection of $4.87. During the same period last year, the company had reported earnings of $5.08 per share.  

On an adjusted basis, the Malboro-maker currently expects at least 9% year-over-year growth in full-year EPS.

CEO André Calantzopoulos said, “In the markets where they are sold, our heated tobacco brands held a sizable combined share of 5.0% year-to-date, driving a total international share of 2.1%, up by 0.6 points.”

READ: Major marijuana stocks experience downward pressure this week

The company has been aiming to ultimately replace cigarettes with smoke-free products. Marlboro, along with Bond Street, Chesterfield, L&M, Lark and Philip Morris, has remained the company’s major global cigarette brands and these contribute to the top-line growth. The volume growth could depend on the strength of the combustible business and smoke-free product portfolios.

The tobacco industry operates in a highly regulated environment. The well-known risks of smoking have led regulators to impose significant restrictions and high excise taxes on cigarettes. Apart from this, cannabis has remained an attractive long-term investment for big tobacco, alcohol, and pharmaceutical companies.   

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