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Why Is Philip Morris (PM) Up 2.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Philip Morris (PM - Free Report) . Shares have added about 2.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Philip Morris due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Philip Morris Q1 Earnings Beat Estimates, Revenues Up Y/Y
Philip Morris reported first-quarter 2021 results. Adjusted earnings per share came in at $1.57, which beat the Zacks Consensus Estimate of $1.40. Further, the bottom line rallied 29.8% year over year. On an organic basis, the bottom line increased 21.5%.
Net revenues of $7,585 million outpaced the Zacks Consensus Estimate of $7,183 million. Moreover, the top line increased 6% from the figure reported in the year-ago quarter. Net revenues, on an organic basis, also improved 2.9%. This was due to favorable pricing variance and higher fees for certain distribution rights. The upsides were partly offset by adverse volume/mix mainly due to soft cigarette shipment volumes.
During the first quarter, revenues from combustible products were down 2.4% to $5,463 million due to declines across most regions, except the European Union and East Asia & Australia. Revenues in the RRPs increased 36.5% to $2,122 million. Total cigarette and heated tobacco unit shipment volumes dropped 3.7% to 167.2 billion units. Cigarette shipment volumes fell 7.3% to 145.5 billion units in the quarter, while heated tobacco unit shipment volumes of 21.7 billion units rose 29.9% year over year. Adjusted operating income came in at $3,492 million, up 25.2% year on year. The metric rose 18.5% on an organic basis. Moreover, adjusted operating income margin of 46% expanded 5.9 percentage points on an organic basis.
Net revenues in the European Union increased 14.8% to $2,909 million. Revenues climbed 5.5% on an organic basis, courtesy of favorable pricing variance and improved volume/mix driven by higher heated tobacco volumes. Total shipment volumes dropped 4.7% to 43,195 million units. In Eastern Europe, net revenues inched up 1% to $796 million. Revenues increased 10.5% on an organic basis, courtesy of favorable volume/mix and pricing variance. Total shipment volumes dropped 0.7% to 25,601 million units.
In the Middle East & Africa region, net revenues declined 8.6% to $801 million. The metric fell 5.9% on an organic basis due to adverse volume/mix, partly negated by favorable pricing. Further, total shipment volumes dropped 8% to 28,038 million units. Revenues in South & Southeast Asia fell 6.2% to $1,173 million. Revenues in the region were down 8.5% on an organic basis. The downside was a result of adverse volume/mix partly and unfavorable pricing variance. Shipment volumes collapsed 7.1% to 34,921 million units.
Revenues from East Asia & Australia advanced 17.3% to $1,472 million. Moreover revenues in the region advanced 11.6% organically, due to favorable pricing variance and favorable volume/mix. Total shipment volumes increased 5.6% to 20,501 million units. Finally, revenues from Latin America & Canada dropped 3.1% to $434 million. The metric declined 0.7% on an organic basis due to unfavorable volume/mix. Moreover, total shipment volumes declined 1.2% to 14,990 million units.
Other Updates & Outlook
The company ended the first quarter with cash and cash equivalents of $3,902 million. Also, it had long-term debt of $27,276 million and shareholders’ deficit of $9,574 million. Management highlighted that continued strength in IQOS acted as a significant upside during the first quarter. At the end of the quarter, IQOS users amounted to approximately 19.1 million. Among them, nearly 14 million users are estimated to have switched to IQOS and stopped smoking.
Philip Morris has been on track to lower the COVID-19-related business disruptions. The company notified that it currently has adequate access to inputs and is not encountering any major supply-related hurdles. All of the company’s cigarette and heated tobacco unit production units are operational globally. The pandemic doesn’t have any major impact on the availability of the company’s products to its customers and adult consumers. Further, the company has sufficient liquidity to manage business.
Coming to the guidance, the company revised view for 2021 and now envisions adjusted earnings per share (EPS) in the range of $5.95-$6.05. At constant currency, adjusted EPS are expected to grow 11-13% to $5.75-$5.85 compared with $5.17 reported in 2020. The guidance takes into consideration continued strength in IQOS and favorable impacts from currency exchange rates worth 20 cents per share. In 2021, management expects gradual improvement in the general operating landscape. The company does not expect a near-term recovery in the duty-free business due to travel-related uncertainties. In fact, management expects the existing dynamics to persist through the end of 2021. Additionally, total cigarette and heated tobacco unit shipment volume growth is likely to range between decline 2% to increase 1% in 2021. Heated tobacco shipment volumes are envisioned in a band of 95-100 billion units in 2021.
For 2021, Phillip Morris expects net revenues to increase nearly 5-7% on an organic basis. Adjusted operating margin on an organic basis is likely to jump 200 basis points in 2021. For second-quarter 2021, the company expects earnings in the bracket of $1.50-$1.55, including favorable currency impact of nearly 4 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Philip Morris has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Philip Morris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Philip Morris (PM) Up 2.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Philip Morris (PM - Free Report) . Shares have added about 2.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Philip Morris due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Philip Morris Q1 Earnings Beat Estimates, Revenues Up Y/Y
Philip Morris reported first-quarter 2021 results. Adjusted earnings per share came in at $1.57, which beat the Zacks Consensus Estimate of $1.40. Further, the bottom line rallied 29.8% year over year. On an organic basis, the bottom line increased 21.5%.
Net revenues of $7,585 million outpaced the Zacks Consensus Estimate of $7,183 million. Moreover, the top line increased 6% from the figure reported in the year-ago quarter. Net revenues, on an organic basis, also improved 2.9%. This was due to favorable pricing variance and higher fees for certain distribution rights. The upsides were partly offset by adverse volume/mix mainly due to soft cigarette shipment volumes.
During the first quarter, revenues from combustible products were down 2.4% to $5,463 million due to declines across most regions, except the European Union and East Asia & Australia. Revenues in the RRPs increased 36.5% to $2,122 million. Total cigarette and heated tobacco unit shipment volumes dropped 3.7% to 167.2 billion units. Cigarette shipment volumes fell 7.3% to 145.5 billion units in the quarter, while heated tobacco unit shipment volumes of 21.7 billion units rose 29.9% year over year. Adjusted operating income came in at $3,492 million, up 25.2% year on year. The metric rose 18.5% on an organic basis. Moreover, adjusted operating income margin of 46% expanded 5.9 percentage points on an organic basis.
Net revenues in the European Union increased 14.8% to $2,909 million. Revenues climbed 5.5% on an organic basis, courtesy of favorable pricing variance and improved volume/mix driven by higher heated tobacco volumes. Total shipment volumes dropped 4.7% to 43,195 million units. In Eastern Europe, net revenues inched up 1% to $796 million. Revenues increased 10.5% on an organic basis, courtesy of favorable volume/mix and pricing variance. Total shipment volumes dropped 0.7% to 25,601 million units.
In the Middle East & Africa region, net revenues declined 8.6% to $801 million. The metric fell 5.9% on an organic basis due to adverse volume/mix, partly negated by favorable pricing. Further, total shipment volumes dropped 8% to 28,038 million units. Revenues in South & Southeast Asia fell 6.2% to $1,173 million. Revenues in the region were down 8.5% on an organic basis. The downside was a result of adverse volume/mix partly and unfavorable pricing variance. Shipment volumes collapsed 7.1% to 34,921 million units.
Revenues from East Asia & Australia advanced 17.3% to $1,472 million. Moreover revenues in the region advanced 11.6% organically, due to favorable pricing variance and favorable volume/mix. Total shipment volumes increased 5.6% to 20,501 million units. Finally, revenues from Latin America & Canada dropped 3.1% to $434 million. The metric declined 0.7% on an organic basis due to unfavorable volume/mix. Moreover, total shipment volumes declined 1.2% to 14,990 million units.
Other Updates & Outlook
The company ended the first quarter with cash and cash equivalents of $3,902 million. Also, it had long-term debt of $27,276 million and shareholders’ deficit of $9,574 million. Management highlighted that continued strength in IQOS acted as a significant upside during the first quarter. At the end of the quarter, IQOS users amounted to approximately 19.1 million. Among them, nearly 14 million users are estimated to have switched to IQOS and stopped smoking.
Philip Morris has been on track to lower the COVID-19-related business disruptions. The company notified that it currently has adequate access to inputs and is not encountering any major supply-related hurdles. All of the company’s cigarette and heated tobacco unit production units are operational globally. The pandemic doesn’t have any major impact on the availability of the company’s products to its customers and adult consumers. Further, the company has sufficient liquidity to manage business.
Coming to the guidance, the company revised view for 2021 and now envisions adjusted earnings per share (EPS) in the range of $5.95-$6.05. At constant currency, adjusted EPS are expected to grow 11-13% to $5.75-$5.85 compared with $5.17 reported in 2020. The guidance takes into consideration continued strength in IQOS and favorable impacts from currency exchange rates worth 20 cents per share. In 2021, management expects gradual improvement in the general operating landscape. The company does not expect a near-term recovery in the duty-free business due to travel-related uncertainties. In fact, management expects the existing dynamics to persist through the end of 2021. Additionally, total cigarette and heated tobacco unit shipment volume growth is likely to range between decline 2% to increase 1% in 2021. Heated tobacco shipment volumes are envisioned in a band of 95-100 billion units in 2021.
For 2021, Phillip Morris expects net revenues to increase nearly 5-7% on an organic basis. Adjusted operating margin on an organic basis is likely to jump 200 basis points in 2021. For second-quarter 2021, the company expects earnings in the bracket of $1.50-$1.55, including favorable currency impact of nearly 4 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Philip Morris has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Philip Morris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.