Philip Morris International Inc.’s (PM - Analyst Report) first-quarter earnings and revenues beat the respective Zacks Consensus Estimates. Revenues and earnings, however, declined year over year due to lower volume.

Philip Morris’ adjusted earnings per share of $1.16 beat the Zacks Consensus Estimate of $1.02 by 13.7%. However, earnings dipped 1.7% from the prior-year quarter figure of $1.18 due to currency headwinds and lower year-over-year sales.

Excluding an unfavorable currency impact of 31 cents, earnings surpassed the prior-year quarter figures by 23.5%.

Philip Morris International Inc. - Earnings Surprise | FindTheCompany

Revenues and Margin

Net revenue (excluding excise taxes) went down 4.4% to $6.6 billion. Results, however, beat the Zacks Consensus Estimate of $6.2 billion by 6.4%. Revenues declined from the year-ago level due to difficult operating environment and currency headwinds.

Excluding currency, revenues went up 9.1%. Cigarette shipment volume surpassed management’s expectations and went up 1.4% to 198.8 billion units mainly due to increase in total market share. Higher shipments in European Union and Eastern Europe, Middle East & Africa (EMEA) were offset by lower shipments in Asia.

Philip Morris' quarterly gross profit declined 3.4% from the prior-year quarter to $4.4 billion as a result of lower revenues. Operating income slipped 2.9% year over year to $2.95 billion due to lower gross profit.

Segment Details

Net revenue in the European Union region slipped 6% to $1.9 billion due to currency headwinds. Excluding currency, revenues climbed 7.8% from the prior-year quarter predominantly reflecting positive pricing, especially in Germany. Market share in the European Union increased 0.4 percentage points (pp) to 39.6%.

Net revenue in the EMEA region slipped 8.3% to $1.8 billion due to unfavorable currency effect. Excluding currency, revenues went up 13.9% year over year due to favorable pricing in Russia.

Asiarecorded net revenue of $2.2 billion, down 1.2% due to currency headwind. Excluding currency, revenues went up 4.6% from the prior-year period due to favorable pricing, primarily in Indonesia.

In Latin America and Canada, revenues gained 1.8% to $726 million. Excluding currency, revenues went up 14%, mainly due to favorable pricing in Argentina and Canada.

Financial Update

During the quarter, Philip Morris did not repurchase any share. In 2014, Philip Morris declared a quarterly dividend of $1.00 per share.

Guidance

Philip Morris raised the fiscal 2015 earnings growth rate to 9–11% from 8–10%. The company expects currency impact of $1.15 per share.

Philip Morris carries a Zacks Rank #3 (Hold). Better-ranked stocks in the tobacco sector are Altria Group Inc. (MO - Analyst Report), Lorillard Inc. (LO - Analyst Report) and Reynolds American Inc. (RAI - Analyst Report). All the stocks have a Zacks Rank #2 (Buy).