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Philip Morris (PM) Q2 Earnings Beat Estimates, Pricing Aids
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Philip Morris International Inc. (PM - Free Report) posted robust second-quarter 2023 results, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. The company continued to benefit from strong pricing, especially for combustible products. It also saw a rise in total volumes in the quarter under review due to smoke-free products.
Quarter in Detail
Adjusted earnings per share (EPS) came in at $1.60, which jumped 16.9% year over year and beat the Zacks Consensus Estimate of $1.48. On a reported basis, the EPS of $1.01 tumbled 29.4%.
Net revenues of $8,967 million increased by 10.5% on an organic basis. The Zacks Consensus Estimate for the top line was pegged at $8,690 million. The year-over-year upside was backed by a rise in total cigarette and heated tobacco unit (HTU) shipment volumes, an improved product mix impact related to the greater proportion of smoke-free products and elevated combustible tobacco pricing.
During the quarter, net revenues from combustible products were up 6% to $5,790 million (up 7.4% on an organic basis). Revenues from smoke-free products (excluding Wellness and Healthcare) jumped 35.3% to $3,101 million (up 18.3% organically).
During the quarter, net revenues from smoke-free products formed 35.4% of the company’s total revenues. Total IQOS users at the end of the second quarter were estimated at roughly 27.2 million (including nearly 19.4 million who switched to IQOS and stopped smoking).
Total cigarette and HTU shipment volumes increased by 3.3% to 188.4 billion units in the quarter, beating our estimate of 183.5 billion units. HTU shipment volumes were driven by a favorable impact of distributor and wholesaler inventory movements, as well as strength in IQOS.
Cigarette shipment volumes dropped 0.4% to 157 billion units in the quarter, while HTU shipment volumes of 31.4 billion units rose 26.6% year over year.
The adjusted operating income ascended 6.9% on an organic basis despite battling global inflationary headwinds associated with direct materials, tobacco leaf, energy and wages.
The adjusted operating margin of 39.4% contracted 1.4 percentage points year over year, though it increased 2.1 points sequentially.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Net revenues in the European region grew 3.1% on an organic basis to $3,402 million. This was a result of favorable pricing, somewhat negated by an adverse volume/mix. Total shipment volumes in the region fell 0.5% to 55.4 billion units.
In the SSEA, CIS & MEA regions, adjusted net revenues increased by 14.9% organically to $2,668 million on improved pricing variance and a favorable volume/mix. Total shipment volumes rose by 2.6% to 90.3 billion units.
In the EA, AU & PMI DF regions, net revenues advanced 23.8% organically to $1,680 million due to a positive volume/mix and better pricing variance. Total shipment volumes in the region surged 19.8% to 27.1 billion units.
Revenues in the Americas dropped 1.5% on an organic basis to $476 million. This was a result of an adverse volume/mix, partly made up by improved pricing. Shipment volumes dipped 3.3% to 15.7 billion units.
Image Source: Zacks Investment Research
Other Updates
Philip Morris became the majority owner of Swedish Match on Nov 11, 2022. In the second quarter, revenues from the segment grew 19.1% on a currency-neutral basis, mainly backed by ZYN’s shipment volume growth. Swedish Match’s net revenues came in at $665 million in the quarter, with smoke-free products forming more than 77% of the segment's total net revenues.
Revenues from the Wellness and Healthcare unit remained flat year over year on an organic basis at $76 million. Our model projected Wellness and Healthcare unit revenues of $77.6 million for the second quarter. Management stated that increased net revenues of smoking cessation products were countered by the adverse impact of phasing for certain inhalation products.
Management expects net revenues of about $300 million for the Wellness and Healthcare segment for the full year. It also expects a robust performance from Swedish Match’s existing operations due to expectations of strong ZYN volumes in the United States.
Philip Morris ended the quarter with cash and cash equivalents of $3,492 million, long-term debt of $41,400 million and a total shareholder deficit of $7,960 million.
During the second quarter, the company announced a quarterly dividend of $1.27 a share.
2023 Guidance
For the full-year 2023, PM expects adjusted EPS in the band of $6.13-$6.22 compared with the $5.98 reported in 2022. Excluding currency movements, the adjusted EPS is envisioned in the band of $6.46-$6.55, suggesting 8-9.5% growth from the year-ago period figure. On a reported basis, management expects an EPS in the range of $5.36-$5.45 compared with the $5.81 reported in 2022.
The total international industry volume for cigarettes and HTUs is estimated to decline in the range of 0.5-1.5%, excluding China and the United States.
The total cigarette and HTU shipment volume growth for Philip Morris is likely to be up to 1%. HTU shipment volumes are envisioned between 125 and 130 billion units. Cigarette shipment volumes are expected to dip 1.5-2.5% in 2023.
For 2023, PM expects net revenues to increase by nearly 7.5-8.5% on an organic basis. The adjusted operating margin on an organic basis is likely to decline 50-150 basis points. The company expects to make additional growth-oriented investments, including the commercialization of ILUMA.
Management expects operating cash flow in the band of $10-$11 billion in 2023, with the capital expenditure likely to be around $1.3 billion. The adjusted effective tax rate is envisioned in the 20.5-21.5% band. Philip Morris stated that it would not make share repurchases in 2023.
For the third quarter of 2023, Philip Morris expects adjusted EPS in the band of $1.60-$1.65, including a currency headwind of 6 cents per share. The EPS guidance reflects HTU shipment volumes of about 31-33 billion units and organic top-line growth in the high single digits.
Additionally, PM expects robust organic adjusted operating income growth in the second half of 2023, which is likely to fuel adjusted operating margin expansion. The company expects a meaningfully solid performance in the fourth quarter.
Shares of this Zacks Rank #3 (Hold) company have risen 5.5% in the past year compared with the industry’s growth of 0.4%.
TreeHouse Foods, a food and beverage product company, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current fiscal-year earnings suggests growth of 120.1% from the year-ago reported figures.
Celsius Holdings, which offers functional drinks and liquid supplements, currently sports a Zacks Rank #1. CELH delivered an earnings surprise of 81.8% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 69.6% and 154.4%, respectively, from the year-ago reported numbers.
Lamb Weston, which is a frozen potato product company, currently carries a Zacks Rank #2 (Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 30% and 117.3%, respectively, from the year-ago reported numbers.
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Philip Morris (PM) Q2 Earnings Beat Estimates, Pricing Aids
Philip Morris International Inc. (PM - Free Report) posted robust second-quarter 2023 results, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. The company continued to benefit from strong pricing, especially for combustible products. It also saw a rise in total volumes in the quarter under review due to smoke-free products.
Quarter in Detail
Adjusted earnings per share (EPS) came in at $1.60, which jumped 16.9% year over year and beat the Zacks Consensus Estimate of $1.48. On a reported basis, the EPS of $1.01 tumbled 29.4%.
Net revenues of $8,967 million increased by 10.5% on an organic basis. The Zacks Consensus Estimate for the top line was pegged at $8,690 million. The year-over-year upside was backed by a rise in total cigarette and heated tobacco unit (HTU) shipment volumes, an improved product mix impact related to the greater proportion of smoke-free products and elevated combustible tobacco pricing.
During the quarter, net revenues from combustible products were up 6% to $5,790 million (up 7.4% on an organic basis). Revenues from smoke-free products (excluding Wellness and Healthcare) jumped 35.3% to $3,101 million (up 18.3% organically).
During the quarter, net revenues from smoke-free products formed 35.4% of the company’s total revenues. Total IQOS users at the end of the second quarter were estimated at roughly 27.2 million (including nearly 19.4 million who switched to IQOS and stopped smoking).
Total cigarette and HTU shipment volumes increased by 3.3% to 188.4 billion units in the quarter, beating our estimate of 183.5 billion units. HTU shipment volumes were driven by a favorable impact of distributor and wholesaler inventory movements, as well as strength in IQOS.
Cigarette shipment volumes dropped 0.4% to 157 billion units in the quarter, while HTU shipment volumes of 31.4 billion units rose 26.6% year over year.
The adjusted operating income ascended 6.9% on an organic basis despite battling global inflationary headwinds associated with direct materials, tobacco leaf, energy and wages.
The adjusted operating margin of 39.4% contracted 1.4 percentage points year over year, though it increased 2.1 points sequentially.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Philip Morris International Inc. price-consensus-eps-surprise-chart | Philip Morris International Inc. Quote
Region-Wise Performance
Net revenues in the European region grew 3.1% on an organic basis to $3,402 million. This was a result of favorable pricing, somewhat negated by an adverse volume/mix. Total shipment volumes in the region fell 0.5% to 55.4 billion units.
In the SSEA, CIS & MEA regions, adjusted net revenues increased by 14.9% organically to $2,668 million on improved pricing variance and a favorable volume/mix. Total shipment volumes rose by 2.6% to 90.3 billion units.
In the EA, AU & PMI DF regions, net revenues advanced 23.8% organically to $1,680 million due to a positive volume/mix and better pricing variance. Total shipment volumes in the region surged 19.8% to 27.1 billion units.
Revenues in the Americas dropped 1.5% on an organic basis to $476 million. This was a result of an adverse volume/mix, partly made up by improved pricing. Shipment volumes dipped 3.3% to 15.7 billion units.
Image Source: Zacks Investment Research
Other Updates
Philip Morris became the majority owner of Swedish Match on Nov 11, 2022. In the second quarter, revenues from the segment grew 19.1% on a currency-neutral basis, mainly backed by ZYN’s shipment volume growth. Swedish Match’s net revenues came in at $665 million in the quarter, with smoke-free products forming more than 77% of the segment's total net revenues.
Revenues from the Wellness and Healthcare unit remained flat year over year on an organic basis at $76 million. Our model projected Wellness and Healthcare unit revenues of $77.6 million for the second quarter. Management stated that increased net revenues of smoking cessation products were countered by the adverse impact of phasing for certain inhalation products.
Management expects net revenues of about $300 million for the Wellness and Healthcare segment for the full year. It also expects a robust performance from Swedish Match’s existing operations due to expectations of strong ZYN volumes in the United States.
Philip Morris ended the quarter with cash and cash equivalents of $3,492 million, long-term debt of $41,400 million and a total shareholder deficit of $7,960 million.
During the second quarter, the company announced a quarterly dividend of $1.27 a share.
2023 Guidance
For the full-year 2023, PM expects adjusted EPS in the band of $6.13-$6.22 compared with the $5.98 reported in 2022. Excluding currency movements, the adjusted EPS is envisioned in the band of $6.46-$6.55, suggesting 8-9.5% growth from the year-ago period figure. On a reported basis, management expects an EPS in the range of $5.36-$5.45 compared with the $5.81 reported in 2022.
The total international industry volume for cigarettes and HTUs is estimated to decline in the range of 0.5-1.5%, excluding China and the United States.
The total cigarette and HTU shipment volume growth for Philip Morris is likely to be up to 1%. HTU shipment volumes are envisioned between 125 and 130 billion units. Cigarette shipment volumes are expected to dip 1.5-2.5% in 2023.
For 2023, PM expects net revenues to increase by nearly 7.5-8.5% on an organic basis. The adjusted operating margin on an organic basis is likely to decline 50-150 basis points. The company expects to make additional growth-oriented investments, including the commercialization of ILUMA.
Management expects operating cash flow in the band of $10-$11 billion in 2023, with the capital expenditure likely to be around $1.3 billion. The adjusted effective tax rate is envisioned in the 20.5-21.5% band. Philip Morris stated that it would not make share repurchases in 2023.
For the third quarter of 2023, Philip Morris expects adjusted EPS in the band of $1.60-$1.65, including a currency headwind of 6 cents per share. The EPS guidance reflects HTU shipment volumes of about 31-33 billion units and organic top-line growth in the high single digits.
Additionally, PM expects robust organic adjusted operating income growth in the second half of 2023, which is likely to fuel adjusted operating margin expansion. The company expects a meaningfully solid performance in the fourth quarter.
Shares of this Zacks Rank #3 (Hold) company have risen 5.5% in the past year compared with the industry’s growth of 0.4%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are TreeHouse Foods (THS - Free Report) , Celsius Holdings (CELH - Free Report) and Lamb Weston (LW - Free Report) .
TreeHouse Foods, a food and beverage product company, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current fiscal-year earnings suggests growth of 120.1% from the year-ago reported figures.
Celsius Holdings, which offers functional drinks and liquid supplements, currently sports a Zacks Rank #1. CELH delivered an earnings surprise of 81.8% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 69.6% and 154.4%, respectively, from the year-ago reported numbers.
Lamb Weston, which is a frozen potato product company, currently carries a Zacks Rank #2 (Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 30% and 117.3%, respectively, from the year-ago reported numbers.