Philip Morris International Inc. (PM) will be releasing its Q4 earnings report before Friday, 2 February 2017. In fact, it is the quarterly and full-year earnings figures that will be released. The tobacco industry is facing major challenges, notably from governments around the world. Strict anti-smoking legislation, a culture of health-conscious behavior, and increasing competition in the tobacco vapour arena are rapidly eroding PMs profitability. In Q3 2016, the makers of Marlboro reported surprising earnings results. That the company managed to generate a 1.63% earnings surprise was notable. In the prior 4 quarters, the average negative earnings surprise was 3.76%. The goal in all instances is to reduce the risk associated with tobacco products, and if PM can successfully convince consumers that its range of products is safer than traditional tobacco, this will suffice. Does this mean that binary options traders should naturally err on the side of caution and go short on the stock?

It’s Not All Up in Smoke Yet for PM Stock

There are several factors at play when we examine the performance of PM stock. These include a shift away from tobacco consumption, with lower overall volumes of activity. Over the past 3-month period, PM stock has declined by 0.1%. Compared to the industry overall, Philip Morris stock is underperforming in a big way. The tobacco market has improved by 5% through 31 January 2017, while PM is barely up 1.5% since October 31, 2016.

Philip Morris is quickly moving towards tobacco products with low attendant risk. This is the vapour category of tobacco products. Fortunately, investors needn’t be overly concerned about the shift away from smoking as Philip Morris is heavily invested in unconventional tobacco-related products. This is particularly true of those products that are less harmful. Otherwise known as NGPs (Next Generation Products), and patents are pending for Heatstick products that do not burn tobacco but rather heat it up. Already, the US FDA has the applications filed away and once the Modified Risk Tobacco Product is approved, PM stock will rally once again.

As a binary options trader, it’s important not to get lost in the weeds here. The long-term prognosis for the tobacco industry is clearly bearish. However, short-term ‘puffs’ of bullish sentiment are going to prevail and there is significant upside potential. As a rule, the bears have got this market locked down, but you will want to watch out for the quarterly and full-year earnings before Friday, 2 February 2017. Trade the news, not the smoke!