Global tobacco manufacturer Phillip Morris International, Inc. ( PM - Analyst Report ) is slated to release its third quarter 2012 results before the opening bell on October 18, 2012. The Zacks Consensus Estimate for third quarter earnings is pegged at $1.39 a share (year over year increase of 1.5%) on revenues of $8.3 billion (year over year decline of 60%).

Second Quarter Fiscal 2012 Recap

Philip Morris reported adjusted second quarter 2012 earnings per share of $1.36, surpassing the prior-year quarter earnings by 9.0%, excluding currency. The reported earnings beat the Zacks Consensus Estimate of $1.34. Earnings went up owing to the favorable impact of lower shares outstanding.

During the quarter, Philip Morris’ net revenue declined 1.8% from the prior-year quarter to $8.1 billion, including an unfavorable currency impact of $402 million. Revenue was in line with the Zacks Consensus Estimate. Excluding currency translation, net revenue increased roughly 2.9% from the prior-year quarter, mainly driven by pricing, which offset volume headwinds.

Agreement of Estimate Revisions

Over the past 30 days, only 1 of the 10 analysts providing estimates on Philip Morris revised the earnings estimates for the third quarter of 2012 in the upward direction. None of the analysts have revised their estimates in the negative direction.

For fiscal 2012, over the past 30 days, 4 of the 13 analysts providing estimates have changed their estimates in the positive direction. None of the analysts have revised it in the opposite direction.

The upward revision in estimates is not surprising as the company has increased its adjusted earnings guidance for full year 2012 by 10%–12%. In addition, the company’s new share buyback program of $18 million (commenced on August 1) will also facilitate earnings growth.

Magnitude of Estimate Revisions

The Zacks Consensus Estimate for the third quarter of fiscal 2012 has remained static over the past 30 days at $1.39 per share. For fiscal 2012, the earnings estimate has climbed 2 cents from $5.17 to $5.19 per share over the past 30 days.

Surprise History

Philip Morris has surpassed the Zacks Consensus Estimate in all of the last four quarters. The earnings surprise ranges from 1.49% to 11.38%, with the average earnings surprise being 4.9%.

Our Recommendation

Philip Morris has been returning value to its shareholders through dividends and buybacks. The company, in addition to share repurchases, has offered impressive dividend yield and consistent dividend hike, showing the financial strength of the company to fund growth and sustain any economic slowdown or a temporary crisis. Moreover, Philip Morris’ strong brand portfolio and its expansion in Asian markets should further augment the position of the company and give it an opportunity to grow.

The company’s major competitors are Altria Group Inc. ( MO - Analyst Report ) and Reynolds American Inc. ( RAI - Analyst Report ) . Currently, we have a long term Neutral recommendation on the stock. Further, Philip Morris holds a Zacks #2 Rank (short-term Buy rating) reflecting the upward trend in estimate revisions.