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) Q3 Earnings: Cigarette Woes Dim Prospects
Read MoreHide Full Article
Philip Morris International Inc. (PM - Free Report) is slated to release third-quarter 2018 results on Oct 18, before the opening bell. The company has a mixed record of earnings surprises in the trailing four quarters. Let’s take a look at the factors that are likely to impact this tobacco giant’s upcoming quarterly announcement.
Estimates for the Quarter
The Zacks Consensus Estimate for third-quarter 2018 earnings is currently pegged at $1.28 per share, reflecting an improvement of 0.8% from $1.27 delivered in the year-ago quarter. This estimate improved by a penny over the past seven days.
Further, the Zacks Consensus Estimate for third-quarter revenues is currently pegged at $7,171 million, depicting a decline of almost 4% from the year-ago quarter’s tally.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Reduced risk products (RRP’s) or low-risk smoking alternatives are rapidly becoming popular, driven by consumers’ rising health consciousness and awareness regarding the harmful impacts of nicotine consumption. With radical investments toward research and development in the RRPs category, Phillip Morris is pioneering the shift from harmful tobacco products to scientific and low-risk alternatives. In fact, the company’s iQOS, a smokeless cigarette, is among one of the leading RRPs in the industry. Moreover, shipment volumes and revenues in the category are steadily expanding.
To sustain this robust growth, Philip Morris plans to invest close to $600 million in RRPs in 2018. Further, to cater to the rising demand for products in this category, the company is undertaking plant conversions, transforming them from cigarette to RRPs manufacturing facilities. Moreover, the marketing and technology sharing agreement between Philip Morris and peer Altria Group (MO - Free Report) , which is currently under FDA review, is also expected to boost the business of the companies. Recently, the company inked a deal with Canada-based Parallax that provides low-risk alternatives of tobacco. We expect that the company’s sustained efforts to augment RRP’s will boost performance in the impending quarter.
Apart from this, strong pricing enabled Philip Morris to generate substantial revenues in the combustible category. It is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes. Moreover, the price hikes help Philip Morris maintain margins at the desired level. The company continues to expect pricing as the key growth driver in the near term.
Weakness in Cigarette Category
We note that tobacco players are grappling with several regulatory hurdles surrounding cigarette sales, which is their major revenue source. Earlier, the FDA made it mandatory for tobacco companies to use precautionary labels on cigarette packets. Also, per court orders, cigarette manufacturers have been directed to put up self-critical advertisements. To add to the woes, the FDA is bent on drastically reducing nicotine in cigarettes to minimally addictive levels. If enacted, low nicotine levels will prove to be disastrous for cigarette manufacturing companies. Moreover, increasing regulatory moves have raised awareness among consumers regarding the detrimental effects of tobacco consumption, motivating them to quit smoking.
The impacts of such initiatives are clearly visible on Philip Morris’s receding cigarette shipment volumes. During second-quarter 2018, total cigarette shipment volume fell 1.5%. Further, shipment volumes in the category fell 5.3% during the first quarter. This was preceded by declines of 2.1%, 4.1%, 7.5% and 11.5% during the fourth, the third, the second and the first quarters of 2017, respectively. The underlying weakness in the cigarette category is likely to persist in third quarter as well. Apart from Philip Morris, performances of other industry majors such as Altria Group, British American Tobacco (BTI - Free Report) and Vector Group (VGR - Free Report) have also been affected by such factors.
All said, lets now take a look at the Zacks Model for the upcoming quarterly announcement.
Zacks Model
Our proven model does not show that Philip Morris is likely to beat estimates in this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Philip Morris (PM) Q3 Earnings: Cigarette Woes Dim Prospects
Philip Morris International Inc. (PM - Free Report) is slated to release third-quarter 2018 results on Oct 18, before the opening bell. The company has a mixed record of earnings surprises in the trailing four quarters. Let’s take a look at the factors that are likely to impact this tobacco giant’s upcoming quarterly announcement.
Estimates for the Quarter
The Zacks Consensus Estimate for third-quarter 2018 earnings is currently pegged at $1.28 per share, reflecting an improvement of 0.8% from $1.27 delivered in the year-ago quarter. This estimate improved by a penny over the past seven days.
Further, the Zacks Consensus Estimate for third-quarter revenues is currently pegged at $7,171 million, depicting a decline of almost 4% from the year-ago quarter’s tally.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Philip Morris International Inc. Price, Consensus and EPS Surprise | Philip Morris International Inc. Quote
RRP’s & Product Pricing to Drive Performance
Reduced risk products (RRP’s) or low-risk smoking alternatives are rapidly becoming popular, driven by consumers’ rising health consciousness and awareness regarding the harmful impacts of nicotine consumption. With radical investments toward research and development in the RRPs category, Phillip Morris is pioneering the shift from harmful tobacco products to scientific and low-risk alternatives. In fact, the company’s iQOS, a smokeless cigarette, is among one of the leading RRPs in the industry. Moreover, shipment volumes and revenues in the category are steadily expanding.
To sustain this robust growth, Philip Morris plans to invest close to $600 million in RRPs in 2018. Further, to cater to the rising demand for products in this category, the company is undertaking plant conversions, transforming them from cigarette to RRPs manufacturing facilities. Moreover, the marketing and technology sharing agreement between Philip Morris and peer Altria Group (MO - Free Report) , which is currently under FDA review, is also expected to boost the business of the companies. Recently, the company inked a deal with Canada-based Parallax that provides low-risk alternatives of tobacco. We expect that the company’s sustained efforts to augment RRP’s will boost performance in the impending quarter.
Apart from this, strong pricing enabled Philip Morris to generate substantial revenues in the combustible category. It is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes. Moreover, the price hikes help Philip Morris maintain margins at the desired level. The company continues to expect pricing as the key growth driver in the near term.
Weakness in Cigarette Category
We note that tobacco players are grappling with several regulatory hurdles surrounding cigarette sales, which is their major revenue source. Earlier, the FDA made it mandatory for tobacco companies to use precautionary labels on cigarette packets. Also, per court orders, cigarette manufacturers have been directed to put up self-critical advertisements. To add to the woes, the FDA is bent on drastically reducing nicotine in cigarettes to minimally addictive levels. If enacted, low nicotine levels will prove to be disastrous for cigarette manufacturing companies. Moreover, increasing regulatory moves have raised awareness among consumers regarding the detrimental effects of tobacco consumption, motivating them to quit smoking.
The impacts of such initiatives are clearly visible on Philip Morris’s receding cigarette shipment volumes. During second-quarter 2018, total cigarette shipment volume fell 1.5%. Further, shipment volumes in the category fell 5.3% during the first quarter. This was preceded by declines of 2.1%, 4.1%, 7.5% and 11.5% during the fourth, the third, the second and the first quarters of 2017, respectively. The underlying weakness in the cigarette category is likely to persist in third quarter as well. Apart from Philip Morris, performances of other industry majors such as Altria Group, British American Tobacco (BTI - Free Report) and Vector Group (VGR - Free Report) have also been affected by such factors.
All said, lets now take a look at the Zacks Model for the upcoming quarterly announcement.
Zacks Model
Our proven model does not show that Philip Morris is likely to beat estimates in this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although Philip Morris has an Earnings ESP of +0.42%, its Zacks Rank #4 (Sell) lowers expectations of an earnings beat this time. You can see the complete list of today’s Zacks #1 Rank stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>