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PM reports 4th quarter & full year 2017 earningsOn an adjusted basis, excluding tax law impacts, PM reported 2017 EPS of $4.72, which was in the middle of their guidance of $4.70-$4.75. Negative currency for the year was 21 cents, so excluding that constant currency EPS was up 10% over 2016. For 2018, PM is guiding EPS to a range of $5.20 to $5.35. That is broken down as 7% to 10% constant currency growth, plus favorable currency of 16 cents (or roughly 3%), for combined forecasted EPS growth of 10% to 13% over 2017. On the main drivers for 2018, here is how I see it: Currency - The forecast of 16 cents positive at today's rates is largely from the Euro, and weighted toward the first half of the year. Obviously can and will change over the course of the year, but the calculation for now is about where I expected/predicted. Income Taxes - This one is a surprise to me. PM, for now, is forecasting essentially no benefit at all from the new lower US tax rates. It appears that any benefit they are receiving from reduced repatriation rates, is offset by taxes they will owe over the next 8 years on previously accumulated foreign earnings. They do note that they are still studying the law and awaiting clarification on items, so this may change over the course of 2018. Operations - Constant currency growth of 7-10% is slightly below their long term guidance of 9-11%. While not a significant difference, given the strength of IQOS growth, I assumed their might be able to do better. Continued impacts from Russia and Saudi Arabia accounts for some of it, as well as their plans for continued spending behind IQOS expansion. We'll see if management gives more information in the conference call. |
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