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Philip Morris matches 2Q
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July 18, 2001: 4:44 p.m. ET
Tobacco maker matches estimates, cites growing tobacco sales
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NEW YORK (CNNfn) - Philip Morris said second-quarter earnings increased 8.4 percent, matching Wall Street forecasts, as the world's biggest cigarette maker posted gains in tobacco sales.
The maker of Marlboro cigarettes and Miller beer also said it anticipates fiscal 2001 earnings growth of 9 percent, which would put it at the low end of analysts' expectations. Wall Street forecasts call for 2001 earnings of $4.07 a share, according to earnings tracker First Call.
For the quarter ended in June, New York-based Philip Morris (MO: Research, Estimates) , a component of the Dow Jones Industrial average, reported earnings of $2.3 billion, or $1.03 a share, including its earlier acquisition of Nabisco. That's compared with earnings $2.2 billion, or 95 cents a share a year earlier.
Analysts on average anticipated $1.03 a share, according to First Call.
Revenue rose 11.2 percent to $23.2 billion from $21 billion a year earlier.
Philip Morris shares edged up to $46 in after-hours trading Wednesday after ending the regular session up 65 cents at $45.50.
Excluding an unfavorable $177 million charge from unfavorable currency transactions, second-quarter earnings would have increased 16.7 percent.
"Philip Morris had a strong quarter and continued its growth momentum with results meeting our expectations despite an unfavorable currency impact of $177 million," CEO Geoffrey C. Bible said.
The news comes hours after Kraft Foods (KFT: up $0.04 to $31.49, Research, Estimates) , a subsidiary that Philip Morris spun off last month, reported second-quarter earnings that edged forecasts.
The maker of Marlboro cigarettes' earnings also comes days after new controversy over a study commissioned by the Czech Republic that showed smokers' early deaths are good for the country's economy.
Despite negative publicity surrounding the tobacco industry stemming from the federal government's civil case, and from individual smokers' claims charging the industry with misleading the public about the health effects of smoking, cigarette makers have generally posted strong growth.
Despite a slowing economy that has put a crimp in consumer spending during the last year, the industry as a whole posted 12 percent earnings growth in 2000 and Wall Street is currently forecasting 10 percent growth for 2001, according to First Call.
In 1996, the year after tobacco whistle blower Jeffery Wigand revealed the industry suppressed information about smoking's health effects, Philip Morris reported 18 percent earnings growth from the previous year.
It was at that time that the Clinton administration aggressively pursued damages against tobacco companies, bringing forth federal and class actions against the industry, resulting in significant settlement payouts.
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In 1998, Philip Morris posted 9 percent earnings growth and just 4 percent growth in 1999. But last year growth shot up to 12 percent, according to First Call.
"The fundamentals remain strong and are strengthening," said Ann Gurking, an analyst at Davenport & Co., who maintains an accumulate rating on the company. "They have strong margins that are improving on tobacco side and the food side and they're controlling costs. The valuation is very compelling."
In the second quarter, Philip Morris said domestic tobacco profit rose 8.4 percent to $1.4 billion mainly because of price increases. International tobacco profit increased 2.9 percent.
The company's Miller Brewing subsidiary reported an 11.6 percent decline in income to $168 million.
Philip Morris also said it repurchased 20.3 million shares in the quarter for $1 billion as part of its three-year $10 billion repurchase program. 
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Philip Morris
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