Tobacco giant Philip Morris International Inc. (PM) has seen its shares jump over 24% so far this year (as of April 10th). This partly builds on a positive revision of its full-year 2017 guidance in February, and a positive reception new products abroad. 

The New York City-based global cigarette and tobacco company was formed in 2008 after it spun off from its domestic counterpart, Altria Group Inc. (MO). The firm, which sells Marlboro and other products in 180 countries outside of the U.S., is heavily exposed to currency headwinds, as a strengthened U.S. dollar puts its overseas revenue at risk.



Lower Currency Headwinds

At an investor conference in February, Philip Morris management said the worldwide tobacco player anticipates lower currency headwinds for the current year, increasing its FY17​ target earnings per share range by $0.10. The company now foresees adjusted EPS in the range of $4.80 to $4.95, reflecting a projected increase of 9% to 12% year-over-year (YOY). The improved guidance was attributed to reduced currency headwinds to $0.08 per share for the full year 2017, compared to the previously anticipated $0.18 per share. As of April 11th, 2017, the reported EPS was $4.48.

Outside of reaping the profit benefits of improving currency conditions, Philip Morris is focused on lifting its bottom line via positive pricing, leveraging its solid brand portfolio and investing in product innovation outside its traditional tobacco products.

Expanding Outside Traditional Business

In order to expand its scope and evolve to meet the demands of an increasingly health-conscious consumer while mitigating against anti-smoking campaigns, the international tobacco leader has entered a strategic partnership with Richmond, Va.-based Altria Group to market Altria’s e-cigarettes internationally, while Altria distributes two Philip Morris tobacco products in the U.S. Further, the NYC-based firm is set to benefit from gaining a marketing advantage over other “reduced-risk" tobacco products, given it receives FDA approval for its IQOS products, touting heat sticks that warm tobacco instead of burning it. IQOS has gained significant traction in markets such as Japan, where it captured more than 5% of the cigarette market in 2016.

Recent steps show Philip Morris’ larger push to evolve in a disrupted cigarette market. Whether a more diversified portfolio will hedge against anti-smoking campaigns, currency headwinds and heightened worldwide competition from rivals, including newly combined British American Tobacco (BTI) and Reynolds American Inc. (RAI), is still up in the air. (See also: Why Philip Morris Could Own the U.S. E-Cig Market.)

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