Philip Morris (NYSE:PM) likely posted one of its better quarters in quite some time. Reported EPS came in at $1.17. However, when factoring for forex, EPS was $1.41, beating estimates by $0.17. On an adjusted basis, Philip Morris posted EPS growth of 8.5%, in line with what I was expecting. Revenues paint a similar story, down 1.5% reported, but up 4.5% when adjusted. Disappointingly, Philip Morris also reaffirmed its lowered FY EPS range of $4.87 to $4.97, highlighting the continued currency headwinds facing the company.
The best news in the report has to do with cigarette volumes, down 2.7% Y/Y. However, this is actually an improvement from the 4.4% decline suffered last quarter. The company saw much improved volumes in Europe and the "EEMEA" segments, with certain Western European and Middle Eastern markets actually posting volume increases.
Share repurchases, a key component in shareholder returns, were $1.0 billion in the quarter, down from $1.25 billion last quarter and $1.5 billion last year. Philip Morris has clearly slowed down the pace of share buybacks, largely to deploy cash to fund its investments into reduced-risk products. Given this trend, Philip Morris may slow down the pace of its dividend growth. I expect only a modest (1% to 5%) dividend increase for the year, down from the double-digit levels posted in recent years.
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