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5 ETFs to Make the Most of Philip Morris's Q2 Earnings Beat
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Philip Morris International Inc. (PM - Free Report) posted impressive second-quarter 2023 results on Jul 20, 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.
Q2 Performance in Detail
The tobacco company reported adjusted earnings per share (EPS) of $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%. The company has an impressive surprise history, having surpassed the consensus EPS estimates in each of the trailing four quarters.
Net revenues of $8,967 million increased 10.5% year over year on an organic basis. The Zacks Consensus Estimate for the top line was pegged at $8,690 million.
According to Reuters, PM’s quarterly profit experienced a significant boost due to several factors, including the relief from escalating tobacco and labor expenses, as well as strong demand for their smokeless products, Zyn and IQOS. These smoke-free alternatives to conventional cigarettes have become increasingly popular among younger consumers, and the company has made substantial investments in them to capitalize on the growing preference for healthier options.
During the quarter, net revenues from combustible products increased 6% to $5,790 million. Revenues from smoke-free products (excluding Wellness and Healthcare) jumped 35.3% to $3,101 million. The company's net revenues from smoke-free goods made up 35.4% of total revenues during the quarter.
Increased Shipment Volume
Total cigarette and HTU shipment volumes increased 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.
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.
Guidance
For 2023, PM expects adjusted EPS in the band of $6.13-$6.22 compared with $5.98 reported in 2022. Excluding currency movements, 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 $5.81 reported in 2022.
The total cigarette and HTU shipment volume growth for Philip Morris is likely to increase to 1%. HTU shipment volumes are envisioned between 125 billion 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 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.
ETF Impact
Here we highlight some ETFs with significant exposure to Philip Morris.
Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report)
Fidelity MSCI Consumer Staples Index ETF tracks the MSCI USA IMI Consumer Staples Index. This fund has a basket of 104 securities and has amassed an asset base of $1.23 billion. It charges an annual fee of 0.08%.
Fidelity MSCI Consumer Staples Index ETF has 4.72% exposure to PM. The fund has a Zacks ETF Rank #3 (Hold) and a Medium risk outlook. FSTA has earned 8.16% over the past year (as of Jul 24).
iShares U.S. Consumer Staples ETF tracks the Russell 1000 Consumer Staples RIC 22.5/45 Capped Index. It has gathered an asset base of $1.72 billion and charges an annual fee of 0.39%. With a basket of 54 securities, the fund has 6.87% exposure to PM.
iShares U.S. Consumer Staples ETF has a Zacks ETF Rank #3 (Hold) and a Medium risk outlook. The fund has added 8.23% over the past year (as of Jul 24).
First Trust Morningstar Dividend Leaders Index Fund (FDL - Free Report)
First Trust Morningstar Dividend Leaders Index Fund tracks the Morningstar Dividend Leaders Index with a basket of securities. It has amassed an asset base of $4.42 billion and charges an annual fee 0.45%.
First Trust Morningstar Dividend Leaders Index Fund has 6.42% exposure to PM and a Zacks ETF Rank #3, along with a Medium risk outlook. The fund has gained 4.01% over the past year but has fallen 1.35% year to date (as of Jul 24).
Cambria Cannabis ETF employs an active strategy and has a basket of 29 securities. The fund has gathered an asset base of $10.48 million and charges an annual fee of 0.42%.
The fund has an exposure of 6.89% to PM. Cambria Cannabis ETF has fallen 9.52% year to date (as of Jul 25).
Consumer Staples Select Sector SPDR ETF seeks to track the performance of the Consumer Staples Select Sector Index with a basket of 37 securities. The fund has amassed an asset base of $17.85 billion and charges an annual fee of 0.10%.
Consumer Staples Select Sector SPDR ETF has an exposure of 4.6% to PM and a Zacks ETF Rank #2 (Buy) along with a Medium risk outlook. The fund has returned 6.68% over the past year (as of Jul 25).
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5 ETFs to Make the Most of Philip Morris's Q2 Earnings Beat
Philip Morris International Inc. (PM - Free Report) posted impressive second-quarter 2023 results on Jul 20, 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.
Q2 Performance in Detail
The tobacco company reported adjusted earnings per share (EPS) of $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%. The company has an impressive surprise history, having surpassed the consensus EPS estimates in each of the trailing four quarters.
Net revenues of $8,967 million increased 10.5% year over year on an organic basis. The Zacks Consensus Estimate for the top line was pegged at $8,690 million.
According to Reuters, PM’s quarterly profit experienced a significant boost due to several factors, including the relief from escalating tobacco and labor expenses, as well as strong demand for their smokeless products, Zyn and IQOS. These smoke-free alternatives to conventional cigarettes have become increasingly popular among younger consumers, and the company has made substantial investments in them to capitalize on the growing preference for healthier options.
During the quarter, net revenues from combustible products increased 6% to $5,790 million. Revenues from smoke-free products (excluding Wellness and Healthcare) jumped 35.3% to $3,101 million. The company's net revenues from smoke-free goods made up 35.4% of total revenues during the quarter.
Increased Shipment Volume
Total cigarette and HTU shipment volumes increased 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.
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.
Guidance
For 2023, PM expects adjusted EPS in the band of $6.13-$6.22 compared with $5.98 reported in 2022. Excluding currency movements, 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 $5.81 reported in 2022.
The total cigarette and HTU shipment volume growth for Philip Morris is likely to increase to 1%. HTU shipment volumes are envisioned between 125 billion 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 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.
ETF Impact
Here we highlight some ETFs with significant exposure to Philip Morris.
Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report)
Fidelity MSCI Consumer Staples Index ETF tracks the MSCI USA IMI Consumer Staples Index. This fund has a basket of 104 securities and has amassed an asset base of $1.23 billion. It charges an annual fee of 0.08%.
Fidelity MSCI Consumer Staples Index ETF has 4.72% exposure to PM. The fund has a Zacks ETF Rank #3 (Hold) and a Medium risk outlook. FSTA has earned 8.16% over the past year (as of Jul 24).
iShares U.S. Consumer Staples ETF (IYK - Free Report)
iShares U.S. Consumer Staples ETF tracks the Russell 1000 Consumer Staples RIC 22.5/45 Capped Index. It has gathered an asset base of $1.72 billion and charges an annual fee of 0.39%. With a basket of 54 securities, the fund has 6.87% exposure to PM.
iShares U.S. Consumer Staples ETF has a Zacks ETF Rank #3 (Hold) and a Medium risk outlook. The fund has added 8.23% over the past year (as of Jul 24).
First Trust Morningstar Dividend Leaders Index Fund (FDL - Free Report)
First Trust Morningstar Dividend Leaders Index Fund tracks the Morningstar Dividend Leaders Index with a basket of securities. It has amassed an asset base of $4.42 billion and charges an annual fee 0.45%.
First Trust Morningstar Dividend Leaders Index Fund has 6.42% exposure to PM and a Zacks ETF Rank #3, along with a Medium risk outlook. The fund has gained 4.01% over the past year but has fallen 1.35% year to date (as of Jul 24).
Cambria Cannabis ETF (TOKE - Free Report)
Cambria Cannabis ETF employs an active strategy and has a basket of 29 securities. The fund has gathered an asset base of $10.48 million and charges an annual fee of 0.42%.
The fund has an exposure of 6.89% to PM. Cambria Cannabis ETF has fallen 9.52% year to date (as of Jul 25).
Consumer Staples Select Sector SPDR ETF (XLP - Free Report)
Consumer Staples Select Sector SPDR ETF seeks to track the performance of the Consumer Staples Select Sector Index with a basket of 37 securities. The fund has amassed an asset base of $17.85 billion and charges an annual fee of 0.10%.
Consumer Staples Select Sector SPDR ETF has an exposure of 4.6% to PM and a Zacks ETF Rank #2 (Buy) along with a Medium risk outlook. The fund has returned 6.68% over the past year (as of Jul 25).