What Made Philip Morris Stock Fall after 1Q16 Earnings?

Philip Morris Let Down Investors with 1Q16 Earnings

(Continued from Prior Part)

Stock performance

Philip Morris International (PM) stock price fell after it released its 1Q16 earnings. It fell 1.3% to $99.28 on April 19, 2016. PM stock has seen volatility since the start of 2015. It’s was able to sustain most of the gain until September 15, 2015, when it fell almost 9.8% to $77.29, from $85.64 on August 12, 2015. The fall was primarily due to currency headwinds and a decline in global markets, particularly in the Asia-Pacific region.

Stock price versus peers

Philip Morris’s stock has risen 21.1% since January 2015. The benchmark S&P 500 Index (IVV) (SPY) (VOO) also rose 2.1%. Stock prices of peers British American Tobacco (BTI), Japan Tobacco (JAPAY) (JAPAF), and Reynolds American (RAI) increased 15.4%, 59.9%, and 53.6%, respectively, since January 2015. RAI stock has gained momentum due to its recent announcement of the asset sale to JAPAF for $5 billion on September 29, 2015. RAI has risen 12.7% since then.

To learn more about the deal, please read Japan Tobacco Buys Natural American Spirit’s International Assets .

Dividend payment

During 1Q16, PM declared a regular quarterly dividend of $1.02. That represented an annualized rate of $4.08 per common share. Since the spin- off with Altria Group (MO), PM has increased its quarterly dividend by 121.7% from the initial annualized rate of $1.84 per common share. That represents a compound annual growth rate of 12.0%.

To learn more about Philip Morris’s spin-off with Altria Group, please read Philip Morris’s Spin-off from Altria, with New Collaborations .

Reducing costs

Philip Morris continues to focus on reducing costs for revenue growth. The company expects its total cost base, including RRPs (reduced-risk products), to increase by ~1% in 2016, excluding currency. It reflects productivity and cost savings programs aided by moderating prices of raw materials.

Next, let’s look at PM’s valuation multiple and growth initiatives.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Philip Morris Let Down Investors with 1Q16 Earnings

• Part 2 - Philip Morris in 1Q16: Revenue, Organic Cigarette Volume Decline

• Part 3 - Philip Morris’s Favorable Pricing in Germany