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Philip Morris (PM) Up More Than 15% in 3 Months: Here's Why
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Philip Morris International Inc. (PM - Free Report) appears smoking hot due to its robust pricing power and gains from reduced risk products or RRPs. These upsides have been working well for the tobacco giant amid cost-related headwinds and low cigarette volumes.
Shares of this Zacks Rank #2 (Buy) company have rallied 17% in the past three months compared with the industry’s growth of 8.7%. The Zacks Consensus Estimate for 2022 earnings per share (EPS) has risen by 2 cents to $5.80 in the past 60 days.
Let’s delve deeper into the aspects that are likely to keep Phillip Morris’ growth record going.
Philip Morris International Inc. Price, Consensus and EPS Surprise
PM has long been benefiting from its strong pricing power, which has aided its revenues and adjusted operating income, even in the face of the unfavorable tax environment and declining cigarette volumes. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases due to the addictive quality of cigarettes.
Higher pricing variance was an upside to the company’s performance across most regions in the third quarter of 2022. During the quarter, the top and bottom lines improved year over year and beat the respective Zacks Consensus Estimate.
Adjusted EPS came in at $1.53, which increased 8.2% year over year on a currency-neutral basis. The year-over-year upside was backed by solid net revenues, elevated pricing and operating cost efficiencies amid certain margin pressures.
Net revenues of $8,032 million increased by 6.7% on an organic basis. Proforma adjusted net revenues grew 6.9% on an organic basis. The top line surpassed the Zacks Consensus Estimate of $7,225 million. Proforma adjusted net revenue growth was backed by the total shipment volume increase, a continued mix shift from cigarettes to smoke-free products and improved pricing variance.
Focus on RRPs
Serious health hazards due to cigarette smoking have pushed consumers toward low-risk RRPs. Philip Morris is progressing well with its business transformation, with smoke-free products generating more than 30% of the company’s net revenues in the third quarter of 2022.
The company is well-placed toward becoming a majority smoke-free company by 2025. To this end, the company’s IQOS, a heat-not-burn device, counts among one of the leading RRPs in the industry.
In the third quarter of 2022, revenues from RRPs jumped 12.9% to $2,362 million. In the quarter, the company witnessed continued strength in IQOS performance. IQOS ILUMA continued to generate solid results across launch markets. Management expects solid prospects from IQOS in the future. As of Sep 30, 2022, PM is estimated to have roughly 19.5 million IQOS users on a proforma basis, suggesting growth of 22% year over year.
Wrapping Up
Philip Morris looks well-placed to add new leaves to its growth story. For 2022, the company expects proforma adjusted net revenues to increase by nearly 6.5-8% on an organic basis (compared with 6-8% before). Proforma adjusted EPS, excluding currency impacts, is expected to increase 10-12% to the $6.09-$6.20 range in 2022.
Nomad Foods, a frozen food product company, currently sports a Zacks Rank #1 (Strong Buy). NOMD has a trailing four-quarter earnings surprise of 11.5%, on average. Nomad Foods’ shares have increased 23.9% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.3% and 4.6%, respectively, from the corresponding year-ago reported figures.
Ingredion, which produces and sells starches and sweeteners, currently carries a Zacks Rank #2. Ingredion’s shares have rallied 19.1% in the past three months. The Zacks Consensus Estimate for INGR’s current financial-year EPS suggests an increase of 5.9% from the year-ago reported number.
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Philip Morris (PM) Up More Than 15% in 3 Months: Here's Why
Philip Morris International Inc. (PM - Free Report) appears smoking hot due to its robust pricing power and gains from reduced risk products or RRPs. These upsides have been working well for the tobacco giant amid cost-related headwinds and low cigarette volumes.
Shares of this Zacks Rank #2 (Buy) company have rallied 17% in the past three months compared with the industry’s growth of 8.7%. The Zacks Consensus Estimate for 2022 earnings per share (EPS) has risen by 2 cents to $5.80 in the past 60 days.
Let’s delve deeper into the aspects that are likely to keep Phillip Morris’ growth record going.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Philip Morris International Inc. price-consensus-eps-surprise-chart | Philip Morris International Inc. Quote
Pricing – a Key Driver
PM has long been benefiting from its strong pricing power, which has aided its revenues and adjusted operating income, even in the face of the unfavorable tax environment and declining cigarette volumes. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases due to the addictive quality of cigarettes.
Higher pricing variance was an upside to the company’s performance across most regions in the third quarter of 2022. During the quarter, the top and bottom lines improved year over year and beat the respective Zacks Consensus Estimate.
Adjusted EPS came in at $1.53, which increased 8.2% year over year on a currency-neutral basis. The year-over-year upside was backed by solid net revenues, elevated pricing and operating cost efficiencies amid certain margin pressures.
Net revenues of $8,032 million increased by 6.7% on an organic basis. Proforma adjusted net revenues grew 6.9% on an organic basis. The top line surpassed the Zacks Consensus Estimate of $7,225 million. Proforma adjusted net revenue growth was backed by the total shipment volume increase, a continued mix shift from cigarettes to smoke-free products and improved pricing variance.
Focus on RRPs
Serious health hazards due to cigarette smoking have pushed consumers toward low-risk RRPs. Philip Morris is progressing well with its business transformation, with smoke-free products generating more than 30% of the company’s net revenues in the third quarter of 2022.
The company is well-placed toward becoming a majority smoke-free company by 2025. To this end, the company’s IQOS, a heat-not-burn device, counts among one of the leading RRPs in the industry.
In the third quarter of 2022, revenues from RRPs jumped 12.9% to $2,362 million. In the quarter, the company witnessed continued strength in IQOS performance. IQOS ILUMA continued to generate solid results across launch markets. Management expects solid prospects from IQOS in the future. As of Sep 30, 2022, PM is estimated to have roughly 19.5 million IQOS users on a proforma basis, suggesting growth of 22% year over year.
Wrapping Up
Philip Morris looks well-placed to add new leaves to its growth story. For 2022, the company expects proforma adjusted net revenues to increase by nearly 6.5-8% on an organic basis (compared with 6-8% before). Proforma adjusted EPS, excluding currency impacts, is expected to increase 10-12% to the $6.09-$6.20 range in 2022.
Other Consumer Staple Stocks to Grab
Some other top-ranked stocks are Nomad Foods (NOMD - Free Report) , Campbell Soup (CPB - Free Report) and Ingredion Incorporated (INGR - Free Report) .
Nomad Foods, a frozen food product company, currently sports a Zacks Rank #1 (Strong Buy). NOMD has a trailing four-quarter earnings surprise of 11.5%, on average. Nomad Foods’ shares have increased 23.9% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.3% and 4.6%, respectively, from the corresponding year-ago reported figures.
Ingredion, which produces and sells starches and sweeteners, currently carries a Zacks Rank #2. Ingredion’s shares have rallied 19.1% in the past three months. The Zacks Consensus Estimate for INGR’s current financial-year EPS suggests an increase of 5.9% from the year-ago reported number.