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) Up 10% in 3 Months, Gains on Pricing & RRPs
Read MoreHide Full Article
Renowned tobacco company — Philip Morris International Inc. (PM - Free Report) — has been gaining from rising popularity of reduced risk products (“RRPs”). Markedly, Philip Morris’ IQOS is one of the leading RRPs in the industry. Moreover, pricing power has been a key catalyst for the company’s top-line growth. Well, such upsides have helped the company stay afloat, despite murky cigarette sales volumes. Markedly, shares of the company have gained 10.3% in the past three months compared with the industry’s rise of 2.9%. That said, lets delve into some of the aspects impacting the performance of this Zacks Rank #3 (Hold) company.
RRPs are Gaining Limelight
RRPs, considered the next-generation tobacco products, have been gaining popularity owing to their less detrimental impacts on health. In fact, consumers are inclining toward RRPs in a bid to quit cigarettes. Notably, Philip Morris’ 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. Since then, the company has been expanding the brand. In December 2020, IQOS 3 received authorization from the FDA for sale in the United States. This version incorporates a number of technological improvements like enhanced battery life and quicker recharge.
Total users of IQOS as of the end of first-quarter 2021 were estimated to be about 19.1 million, including nearly 14 million users who have shifted from smoking to IQOS. Strong growth in IQOS boosted revenues in the RRPs category, which increased 36.5% to $2,122 million in the first quarter. Moreover, heated tobacco unit shipment volumes of 21.7 billion units rose 29.9% year over year.
The company expects its heated tobacco category to keep gaining from the growing acceptance of IQOS devices. As part of its transformation efforts, the company is committed toward expanding these products to more markets. Markedly, it has started commercializing IQOS VEEV, which is its new e-vapor product. On its first-quarter 2021 earnings call, management hinted that it is preparing for the rollout of IQOS ILUMA. Among other initiatives, Philip Morris announced a partnership with South Korea’s KT&G in January 2020 to commercialize the latter’s smoke-free products outside the country.
Such efforts keep the company well placed for transforming into a majority smoke-free company by 2025. The company is on track to achieve its 2021 goal of 90-100 billion shipments of heated tobacco units. 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 been expanding their offerings in the low-risk tobacco space.
Image Source: Zacks Investment Research
Pricing Power Aids
Strong pricing for tobacco products has been a significant upside for Philip Morris. This has been boosting revenues and adjusted operating income despite unfavorable tax environment and declining cigarette volumes. Though higher pricing might lead to possible decline 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 first-quarter 2021. Favorable combustible pricing aided the company’s adjusted operating income margin, which rose 18.5% (on an organic basis) in the quarter. Continued pricing power is likely to keep supporting the company’s performance in the forthcoming periods.
Wrapping Up
We note that Philip Morris has long been grappling with soft cigarette sales volumes. Apart from pandemic-led hurdles, cigarette shipment volumes are being adversely impacted by regulatory limitations and consumers’ rising health consciousness. During first-quarter 2021, cigarette shipment volumes fell 7.3% to 145.5 billion units, while revenues from combustible products were down 2.4% due to declines in most regions. Moreover, the company does not expect a near-term recovery in the duty-free business due to travel-related uncertainties.
Nevertheless, we believe that gains from RRPs and pricing are likely to continue supporting Philip Morris and keep it poised for growth in the forthcoming periods. In fact, the company’s recent move to relocate its headquarters to Connecticut goes in tandem with its transformation process. The new location is likely to provide an efficient mix of technological knowledge, futuristic approach and broadened ways of problem-solving. These will help Philip Morris to expand alternatives to cigarettes as well as introduce solutions related to respiratory drug delivery and botanicals.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
Image: Bigstock
Philip Morris (PM) Up 10% in 3 Months, Gains on Pricing & RRPs
Renowned tobacco company — Philip Morris International Inc. (PM - Free Report) — has been gaining from rising popularity of reduced risk products (“RRPs”). Markedly, Philip Morris’ IQOS is one of the leading RRPs in the industry. Moreover, pricing power has been a key catalyst for the company’s top-line growth. Well, such upsides have helped the company stay afloat, despite murky cigarette sales volumes. Markedly, shares of the company have gained 10.3% in the past three months compared with the industry’s rise of 2.9%. That said, lets delve into some of the aspects impacting the performance of this Zacks Rank #3 (Hold) company.
RRPs are Gaining Limelight
RRPs, considered the next-generation tobacco products, have been gaining popularity owing to their less detrimental impacts on health. In fact, consumers are inclining toward RRPs in a bid to quit cigarettes. Notably, Philip Morris’ 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. Since then, the company has been expanding the brand. In December 2020, IQOS 3 received authorization from the FDA for sale in the United States. This version incorporates a number of technological improvements like enhanced battery life and quicker recharge.
Total users of IQOS as of the end of first-quarter 2021 were estimated to be about 19.1 million, including nearly 14 million users who have shifted from smoking to IQOS. Strong growth in IQOS boosted revenues in the RRPs category, which increased 36.5% to $2,122 million in the first quarter. Moreover, heated tobacco unit shipment volumes of 21.7 billion units rose 29.9% year over year.
The company expects its heated tobacco category to keep gaining from the growing acceptance of IQOS devices. As part of its transformation efforts, the company is committed toward expanding these products to more markets. Markedly, it has started commercializing IQOS VEEV, which is its new e-vapor product. On its first-quarter 2021 earnings call, management hinted that it is preparing for the rollout of IQOS ILUMA. Among other initiatives, Philip Morris announced a partnership with South Korea’s KT&G in January 2020 to commercialize the latter’s smoke-free products outside the country.
Such efforts keep the company well placed for transforming into a majority smoke-free company by 2025. The company is on track to achieve its 2021 goal of 90-100 billion shipments of heated tobacco units. 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 been expanding their offerings in the low-risk tobacco space.
Pricing Power Aids
Strong pricing for tobacco products has been a significant upside for Philip Morris. This has been boosting revenues and adjusted operating income despite unfavorable tax environment and declining cigarette volumes. Though higher pricing might lead to possible decline 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 first-quarter 2021. Favorable combustible pricing aided the company’s adjusted operating income margin, which rose 18.5% (on an organic basis) in the quarter. Continued pricing power is likely to keep supporting the company’s performance in the forthcoming periods.
Wrapping Up
We note that Philip Morris has long been grappling with soft cigarette sales volumes. Apart from pandemic-led hurdles, cigarette shipment volumes are being adversely impacted by regulatory limitations and consumers’ rising health consciousness. During first-quarter 2021, cigarette shipment volumes fell 7.3% to 145.5 billion units, while revenues from combustible products were down 2.4% due to declines in most regions. Moreover, the company does not expect a near-term recovery in the duty-free business due to travel-related uncertainties.
Nevertheless, we believe that gains from RRPs and pricing are likely to continue supporting Philip Morris and keep it poised for growth in the forthcoming periods. In fact, the company’s recent move to relocate its headquarters to Connecticut goes in tandem with its transformation process. The new location is likely to provide an efficient mix of technological knowledge, futuristic approach and broadened ways of problem-solving. These will help Philip Morris to expand alternatives to cigarettes as well as introduce solutions related to respiratory drug delivery and botanicals.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>