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Pricing power in a (presumed) depressed category ~~~ can you say ~~~ Cha---ching !!!
Philip Morris, Reynolds show pricing power
10/21 10:05 AM
* Philip Morris (PM:$57.4000,$-0.0800,-0.14%) Q3 EPS $1 vs Wall Street view $1.02
* Reynolds EPS $1.35 ex-items vs Street view $1.34
* Philip Morris (PM:$57.4000,$-0.0800,-0.14%) speeds up share repurchase
* Philip Morris (PM:$57.4000,$-0.0800,-0.14%) , Reynolds' shares down in early trading
By Jon Lentz and Brad Dorfman
NEW YORK/CHICAGO, Oct 21 (Reuters) - Two of the world's largest tobacco companies posted quarterly earnings that showed smokers were willing to accept price increases as they faced paying higher taxes in many markets.
Reynolds American Inc (RAI:$62.421,0$-0.5790,-0.92%) , the second-largest U.S. tobacco company, on Thursday said its earnings beat analysts' expectations and it raised the low end of its full-year earnings forecast. Philip Morris International Inc (PM:$57.4000,$-0.0800,-0.14%) raised its full-year forecast and said it would boost its 2010 share repurchases by $1 billion.
Philip Morris' (PM:$57.4000,$-0.0800,-0.14%) stock was pressured as third-quarter earnings fell short of analyst expectations, hurt by weak shipments to Japan, where customers built up more inventory in the second quarter ahead of a major tax increase.
"The conclusion that you can draw is that in most markets, the ability to raise prices at a faster rate than consumption ... is intact," Morningstar analyst Philip Gorham said of Philip Morris (PM:$57.4000,$-0.0800,-0.14%) , adding that the company still must work through "some really egregious tax increases" in countries such as Greece.
Investors count on tobacco companies to produce a steady stream of cash, despite the tax increases and a halting economic recovery in the United States and elsewhere.
Both Philip Morris (PM:$57.4000,$-0.0800,-0.14%) and Reynolds, as well as top U.S. cigarette maker Altria Group Inc (MO:$24.9800,$0.0600,0.24%) , have raised dividends in recent weeks. Altria (MO:$24.9800,$0.0600,0.24%) on Wednesday posted better-than- expected earnings as its Marlboro cigarettes gained market share. [ID:nN20192147]
Philip Morris' (PM:$57.4000,$-0.0800,-0.14%) shares fell 1.1 percent, or 71 cents, to $56.77, while Reynolds' shares were down 60 cents, or nearly 1 percent, at $62.40, both in early New York Stock Exchange trading. Altria (MO:$24.9800,$0.0600,0.24%) gained 4 cents to $24.96, also on the NYSE.
FORECASTS RAISED
Philip Morris (PM:$57.4000,$-0.0800,-0.14%) said profit was $1.82 billion, or 99 cents per share in the third quarter, compared with $1.80 billion, or 93 cents per share, a year earlier.
Excluding one-time items, earnings were $1.00 a share, 2 cents below the analysts' average forecast, according to Thomson Reuters I/B/E/S.
Philip Morris (PM:$57.4000,$-0.0800,-0.14%) raised its full-year profit forecast to $3.90 to $3.95 a share, compared with the $3.75 to $3.85 it forecast last quarter.
The company shipped 229.21 billion cigarettes in the third quarter, up 4.5 percent from a year earlier.
The company also said it would move an additional $1 billion of share repurchases into 2010 and will repurchase about $5 billion for the year.
Reynolds, which makes Camel cigarettes and Grizzly smokeless tobacco, said profit was $381 million, or $1.30 per share in the quarter, compared with $362 million, or $1.24 per share, a year earlier.
Excluding one-time items, earnings were $1.35 a share, a penny above the average analyst estimate, according to Thomson Reuters I/B/E/S.
Reynolds expects full-year earnings per share, excluding one-time items, of $4.95 to $5.05, narrowed from a previous forecast of $4.90 to $5.05.
The company shipped 20.1 billion cigarettes in the quarter, down 2.6 percent from a year earlier.
(Reporting by Jon Lentz and Brad Dorfman; Editing by Maureen Bavdek)
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