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) Solid Smoke-Free Products Aid Amid High Costs
Read MoreHide Full Article
Philip Morris International Inc. (PM - Free Report) has been benefiting from its focus on expanding in the smoke-free products arena. Strong pricing power has also been working well for the company, which is expecting certain margin pressures in the first half of 2023. Let’s delve deeper.
Factors Working Well
The company is progressing well with its business transformation, with smoke-free products generating 36% of its net revenues in the fourth quarter of 2022. PM is well placed to become a majority smoke-free company by 2025. Toward this end, the company’s IQOS, a heat-not-burn device, counts as one of the leading RRPs in the industry. The company expects such advanced and high-quality products to aid adult smokers in switching from traditional cigarettes to smoke-free options.
In the fourth quarter of 2022, revenues from smoke-free products (excluding Wellness and Healthcare) jumped 23% to $2,866 million. In the quarter, the company witnessed continued strength in IQOS performance. Total IQOS users at the end of the fourth quarter were estimated at roughly 24.9 million (including nearly 17.8 million who switched to IQOS and stopped smoking). For 2023, management expects heated tobacco unit (HTU) shipment volumes of 125-130 billion units, suggesting 15-19% year-over-year growth.
Among other initiatives, Philip Morris became the majority owner of Swedish Match on Nov 11, 2022. Management expects a robust performance from Swedish Match’s existing operations in 2023. Further, on Jan 30, 2023, Philip Morris unveiled a long-term partnership with KT&G to continue commercializing the innovative smoke-free devices and consumables of the latter on a unique, worldwide basis (excluding South Korea). The deal covers 15 years and is likely to enhance Philip Morris’ smoke-free product portfolio.
Moving on, the company has been benefiting from its strong pricing power. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes. Higher pricing variance was an upside to the company’s performance (mainly due to increased combustible tobacco pricing) in the fourth quarter of 2022. During the quarter, both the top and bottom lines improved year over year and beat the respective Zacks Consensus Estimate.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Philip Morris has been battling cost-related headwinds for a while now. In the fourth quarter of 2022, the adjusted operating income margin was somewhat affected by increased manufacturing costs (mainly due to escalated logistics costs and other inflationary impacts). In 2023, the adjusted operating margin on an organic basis is likely to decline 50-150 basis points.
Management expects certain margin pressures in the first half of 2023. It expects the first quarter to be the most difficult, wherein it expects earnings per share (EPS) in the band of $1.28-$1.33, including currency headwinds. This reflects HTU shipment volumes of 26-28 billion units, organic top-line growth in the low-single digits and lower margins. Apart from these, the company expects increased net interest costs of around $200 million for 2023 compared with the 2022 levels.
Wrapping Up
Philip Morris is likely to continue benefiting from its robust pricing actions and smoke-free portfolio strength amid cost inflation and other headwinds.
For 2023, management expects net revenues to increase 7-8.5% on an organic basis, driven by higher combustible pricing and the continued progress of IQOS. The adjusted EPS is envisioned in the range of $6.25-$6.37, including currency headwinds. The company posted an adjusted EPS of $5.34 in 2022.
Shares of the Zacks Rank #3 (Hold) company have gained 5% in the past six months compared with the industry’s rise of 3.5%.
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the corresponding year-ago reported figures.
Lamb Weston, which is a frozen potato product company, currently carries a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 52.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and EPS suggests an increase of 19.3% and 89.9%, respectively, from the year-ago reported number.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Philip Morris (PM) Solid Smoke-Free Products Aid Amid High Costs
Philip Morris International Inc. (PM - Free Report) has been benefiting from its focus on expanding in the smoke-free products arena. Strong pricing power has also been working well for the company, which is expecting certain margin pressures in the first half of 2023. Let’s delve deeper.
Factors Working Well
The company is progressing well with its business transformation, with smoke-free products generating 36% of its net revenues in the fourth quarter of 2022. PM is well placed to become a majority smoke-free company by 2025. Toward this end, the company’s IQOS, a heat-not-burn device, counts as one of the leading RRPs in the industry. The company expects such advanced and high-quality products to aid adult smokers in switching from traditional cigarettes to smoke-free options.
In the fourth quarter of 2022, revenues from smoke-free products (excluding Wellness and Healthcare) jumped 23% to $2,866 million. In the quarter, the company witnessed continued strength in IQOS performance. Total IQOS users at the end of the fourth quarter were estimated at roughly 24.9 million (including nearly 17.8 million who switched to IQOS and stopped smoking). For 2023, management expects heated tobacco unit (HTU) shipment volumes of 125-130 billion units, suggesting 15-19% year-over-year growth.
Among other initiatives, Philip Morris became the majority owner of Swedish Match on Nov 11, 2022. Management expects a robust performance from Swedish Match’s existing operations in 2023. Further, on Jan 30, 2023, Philip Morris unveiled a long-term partnership with KT&G to continue commercializing the innovative smoke-free devices and consumables of the latter on a unique, worldwide basis (excluding South Korea). The deal covers 15 years and is likely to enhance Philip Morris’ smoke-free product portfolio.
Moving on, the company has been benefiting from its strong pricing power. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes. Higher pricing variance was an upside to the company’s performance (mainly due to increased combustible tobacco pricing) in the fourth quarter of 2022. During the quarter, both the top and bottom lines improved year over year and beat the respective Zacks Consensus Estimate.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Philip Morris International Inc. price-consensus-eps-surprise-chart | Philip Morris International Inc. Quote
Not All is Rosy
Philip Morris has been battling cost-related headwinds for a while now. In the fourth quarter of 2022, the adjusted operating income margin was somewhat affected by increased manufacturing costs (mainly due to escalated logistics costs and other inflationary impacts). In 2023, the adjusted operating margin on an organic basis is likely to decline 50-150 basis points.
Management expects certain margin pressures in the first half of 2023. It expects the first quarter to be the most difficult, wherein it expects earnings per share (EPS) in the band of $1.28-$1.33, including currency headwinds. This reflects HTU shipment volumes of 26-28 billion units, organic top-line growth in the low-single digits and lower margins. Apart from these, the company expects increased net interest costs of around $200 million for 2023 compared with the 2022 levels.
Wrapping Up
Philip Morris is likely to continue benefiting from its robust pricing actions and smoke-free portfolio strength amid cost inflation and other headwinds.
For 2023, management expects net revenues to increase 7-8.5% on an organic basis, driven by higher combustible pricing and the continued progress of IQOS. The adjusted EPS is envisioned in the range of $6.25-$6.37, including currency headwinds. The company posted an adjusted EPS of $5.34 in 2022.
Shares of the Zacks Rank #3 (Hold) company have gained 5% in the past six months compared with the industry’s rise of 3.5%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are Post Holdings (POST - Free Report) , General Mills (GIS - Free Report) and Lamb Weston (LW - Free Report) .
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the corresponding year-ago reported figures.
Lamb Weston, which is a frozen potato product company, currently carries a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 52.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and EPS suggests an increase of 19.3% and 89.9%, respectively, from the year-ago reported number.