Updated from 11:33 a.m. EST
A recession didn't keep
from boosting its ongoing earnings by more than 11% as the conglomerate coaxed solid gains in its food business and continued to find new markets for cigarettes. The company also confirmed its succession plan, naming Louis Camilleri chief executive officer.
The tobacco and food giant earned $2.16 billion, or 99 cents per diluted share, compared with $1.95 billion, or 87 cents per diluted share, on an underlying basis a year ago. The numbers met Wall Street expectations. Philip Morris' underlying results exclude businesses sold since the beginning of 2000.
For 2001, operating earnings rose 8.9% to $8.9 billion, or $4.04 a share, on an underlying basis. Shares of Philip Morris closed down 22 cents, or 0.4%, to $49.57. The stock is up 8.1% since the beginning of the year.
The company said Camilleri will take over as chief executive in April. "Together, Louis Camilleri's management experience and CFO background make him the ideal CEO," said Martin Feldman, an analyst at Salomon Smith Barney.
Overall, Wall Street was pleased with the company's results: "These are solid numbers, considering we're in an earnings recession," said Robert Campagnino, an analyst at Prudential Securities.
In the months ahead, public health issues will continue to affect cigarette makers. "Overhanging the stock is tobacco litigation," said Ann Gurkin, an analyst at Davenport.
Still, the company's fundamentals are strong, and it's gaining market share at the expense of its competition. In the fourth quarter, Philip Morris said revenue was up 13.2%, on an underlying basis, to $22 billion from the year-ago period. The company's sales exceeded analysts' forecasts of $21.7 billion.
Fourth-quarter domestic operating income from tobacco units, which include Marlboro, Parliament, Virginia Slims, and Basic brands, rose 6.7% to $1.6 billion, as a result of higher pricing.
Operating income from international tobacco businesses rose 2.8% to $1.1 billion. In Eastern Europe, volume rose 14.3%, driven by strong growth in Russia and Ukraine. But it edged up only 0.7% in Latin America, due to steep declines in Argentina, where the company sees further deterioration.
Philip Morris' food division,
, saw operating companies income rise 38.4% to $1.5 billion.
Miller Brewing, the company's ailing beer unit, showed some strength in the fourth quarter, as operating income rose 30.5% to $77 million from a weak quarter a year ago. Income was down 7.9% to $500 million for 2001, with lower volume and higher marketing expenses.
"The fourth-quarter results represent the start of a turnaround, " said Feldman of Salomon Smith Barney. "But much work remains to be done." The unit makes up 3% of operating profits.
On a conference call with analysts this afternoon, Camilleri said: "We hope to see a stronger performance this year, with the introduction of new products. But we're not oblivious to consolidation in the industry, and we'll pursue the option that is most favorable to our shareholders."
Looking ahead, Philip Morris said it expects underlying earnings per share to grow 9% to 11% in 2002, roughly in line with the consensus estimate. The company will change its name to Altria, pending shareholder approval in April.