We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Philip Morris (PM) Gains on RRPs Popularity & Pricing Power
Read MoreHide Full Article
Receding cigarette sales volumes, stemming from consumers’ rising health consciousness and regulatory headwinds, have led several tobacco companies including Philip Morris International Inc. (PM - Free Report) to expand low-risk offerings. These next-generation tobacco products have been gaining immense popularity owing to their less detrimental impacts on health. In fact, Philip Morris is among the industry pioneers in driving the shift from cigarettes to reduced risk products (“RRPs”). Moreover, efficient pricing strategies have been fundamental to the company’s growth. Let’s take a closer look.
RRPs Continue Growing
Philip Morris’ IQOS is one of the leading RRPs in the industry. IQOS was launched in the United States in 2019, through a commercial deal with Altria Group, Inc. (MO - Free Report) that was approved by the FDA. In December 2020, IQOS 3 received authorization from the FDA for sale in the United States. The new device incorporates a number of technological improvements like enhanced battery life and quicker recharge.
We note that IQOS devices contributed nearly 7% to the company’s revenues in the RRPs category in 2020. In fact, total users of IQOS as of the end of fourth-quarter 2020 were estimated to be about 17.6 million. Strong growth in IQOS boosted revenues in the RRPs category, which increased 26.3% year on year to $1,937 million in the fourth quarter. Moreover, heated tobacco unit shipment volumes of 21.7 billion units rose 26.9% year over year. The company expects its heated tobacco category to keep gaining from the growing popularity and acceptance of IQOS devices. Therefore, it is committed toward expanding these products to more markets.
We note that other tobacco companies such as Turning Point Brands, Inc. (TPB - Free Report) and British American Tobacco p.l.c. (BTI - Free Report) have also been expanding their offerings in the low-risk tobacco space.
Pricing is a Key Upside
Philip Morris has long been benefiting from strong pricing power. This has been boosting revenues and adjusted operating income despite unfavorable tax environment and declining cigarette volumes. Though higher pricing might lead to possible reduction in cigarette consumption, it is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes.
Evidently, higher pricing variance was an upside to the company’s performance across most regions during the fourth quarter. Favorable combustible products pricing aided the company’s adjusted operating income margin, which rose 1.7% (on an organic basis) in the quarter. Continued pricing power is likely to keep supporting the company’s performance in the forthcoming periods.
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .
Image: Bigstock
Philip Morris (PM) Gains on RRPs Popularity & Pricing Power
Receding cigarette sales volumes, stemming from consumers’ rising health consciousness and regulatory headwinds, have led several tobacco companies including Philip Morris International Inc. (PM - Free Report) to expand low-risk offerings. These next-generation tobacco products have been gaining immense popularity owing to their less detrimental impacts on health. In fact, Philip Morris is among the industry pioneers in driving the shift from cigarettes to reduced risk products (“RRPs”). Moreover, efficient pricing strategies have been fundamental to the company’s growth. Let’s take a closer look.
RRPs Continue Growing
Philip Morris’ IQOS is one of the leading RRPs in the industry. IQOS was launched in the United States in 2019, through a commercial deal with Altria Group, Inc. (MO - Free Report) that was approved by the FDA. In December 2020, IQOS 3 received authorization from the FDA for sale in the United States. The new device incorporates a number of technological improvements like enhanced battery life and quicker recharge.
We note that IQOS devices contributed nearly 7% to the company’s revenues in the RRPs category in 2020. In fact, total users of IQOS as of the end of fourth-quarter 2020 were estimated to be about 17.6 million. Strong growth in IQOS boosted revenues in the RRPs category, which increased 26.3% year on year to $1,937 million in the fourth quarter. Moreover, heated tobacco unit shipment volumes of 21.7 billion units rose 26.9% year over year. The company expects its heated tobacco category to keep gaining from the growing popularity and acceptance of IQOS devices. Therefore, it is committed toward expanding these products to more markets.
We note that other tobacco companies such as Turning Point Brands, Inc. (TPB - Free Report) and British American Tobacco p.l.c. (BTI - Free Report) have also been expanding their offerings in the low-risk tobacco space.
Pricing is a Key Upside
Philip Morris has long been benefiting from strong pricing power. This has been boosting revenues and adjusted operating income despite unfavorable tax environment and declining cigarette volumes. Though higher pricing might lead to possible reduction in cigarette consumption, it is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes.
Evidently, higher pricing variance was an upside to the company’s performance across most regions during the fourth quarter. Favorable combustible products pricing aided the company’s adjusted operating income margin, which rose 1.7% (on an organic basis) in the quarter. Continued pricing power is likely to keep supporting the company’s performance in the forthcoming periods.
Shares of this Zacks Rank #3 (Hold) company have gained 7.9% in the past three months compared with the industry’s rise of 11%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5G Revolution: 3 Stocks to Make Your Move
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .
Download now. Today the report is FREE >>