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Philip Morris (PM) Ups View on Q2 Earnings Beat: Pricing Aids
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Philip Morris International Inc. (PM - Free Report) posted strong second-quarter 2024 results, with the top and bottom lines exceeding the Zacks Consensus Estimate and revenues increasing year over year. While the bottom line dipped marginally, it showed double-digit growth, excluding currency headwinds.
Philip Morris continues to benefit from solid pricing and success in its smoke-free business, especially IQOS and ZYN. This Zacks Rank #2 (Buy) company expects to witness a robust second-half performance and raise its full-year guidance for 2024 despite the adverse currency movements.
Quarter in Detail
Adjusted earnings per share (EPS) came in at $1.59, which dropped 0.6% year over year while increasing 10.6%, excluding currency movements. Additionally, the bottom line beat the Zacks Consensus Estimate of $1.55.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Net revenues of $9,468 million increased 5.6% on a reported basis and 9.6% on an organic basis (excluding currency movements and acquisitions). Revenues came ahead of the Zacks Consensus Estimate of $9,158 million. The increase in organic revenues was backed by positive pricing variance (mainly backed by elevated combustible tobacco pricing) and favorable volume/mix (accountable to increased smoke-free product volumes).
During the quarter, net revenues from combustible products increased 1.2% and 4.8% organically due to high single-digit pricing and solid industry volumes.
Revenues from the smoke-free business increased 13.6% (up 18.3% on an organic basis) and formed 38.1% of the company’s total revenues (up by 2.7 percentage points compared with the year-ago period). Within the smoke-free business, the inhalable smoke-free products (SFP) were driven by strength in IQOS, while oral SFP was fueled by increased shipment volumes of ZYN.
Total shipment volumes (including heated tobacco units, oral SFP and cigarettes) increased 2.8% to 197.3 billion units in the second quarter.
The adjusted operating income ascended 12.5% on an organic basis to $3,656 million due to improved pricing variance and a positive volume/mix, somewhat negated by increased costs, mainly marketing, administration and research costs.
Region-Wise Performance
Net revenues in the European region grew 7% on an organic basis to $3,815 million. This was a result of favorable pricing and volume/mix. Total shipment volumes in the region increased 1.7% to 56.4 billion units.
In the SSEA, CIS & MEA regions, net revenues increased 13.3% organically to $2,771 million on improved pricing variance and a favorable volume/mix. Total shipment volumes rose by 4.5% to 94.3 billion units.
In the EA, AU & PMI DF regions, net revenues grew 6.7% organically to $1,673 million on favorable volume/mix and pricing variance. Total shipment volumes in the region climbed 1% to 27.3 billion units.
Revenues in the Americas surged 14.2% on an organic basis to $1,129 million. This was a result of the positive volume/mix and pricing. Total shipment volumes decreased 3.6% to 15.1 billion units.
Other Updates
Revenues from the Wellness and Healthcare unit improved 5.3% year over year on an organic basis to $80 million. Management expects 2024 net revenues and the adjusted operating loss in the Wellness and Healthcare segment to remain mostly unchanged from 2023.
Philip Morris ended the quarter with cash and cash equivalents of $4,807 million, long-term debt of $44,647 million and a total shareholder deficit of $7,942 million.
Philip Morris declared a quarterly dividend of $1.30 per share. However, the company stated that it would not make share repurchases in 2024.
2024 Guidance
Adjusted EPS for 2024 is envisioned in the $6.33-$6.45 range, suggesting 5.3-7.3% growth. Adjusted EPS, excluding currency, is likely to be in the $6.67-$6.79 band, indicating a year-over-year increase of 11-13%.
For the full year 2024, PM expects reported EPS in the band of $5.89-$6.01 compared with the $5.02 reported in 2023. Adjusted EPS was previously anticipated between $6.19 and $6.31 earlier, whereas adjusted EPS, excluding currency, was envisioned in the $6.55-$6.67 range. Further, the reported EPS was expected to be $5.70-$5.82.
The total international industry volume for cigarettes and HTUs (excluding China and the United States) is likely to remain mostly stable in 2024. This compares with the prior view of a decline of 2% to flat. The total cigarette, HTU and oral smoke-free product shipment volume for Philip Morris is likely to rise 1-2%, driven by smoke-free product strength compared with the previous view of flat to an increase of 1%.
Nicotine pouch shipment volumes in the United States are now expected between 560 and 580 million cans for 2024, up from nearly 560 cans guided before.
For 2024, PM now expects net revenues to increase 7.5-9% on an organic basis compared with 7-8.5% growth expected before. The operating income on an organic basis is likely to increase 11-13%, up from the 10-12% growth forecasted earlier. Management expects an acceleration in organic smoke-free net revenue and gross profit increase from 2023.
Management expects operating cash flow of around $11 billion in 2024 compared with the earlier view of $10-$11 billion. Capital expenditures are likely to be $1.3-$1.4 billion now, including additional investments in ZYN. This was earlier projected to be about $1.2 billion.
For the third quarter of 2024, Philip Morris envisions adjusted EPS in the band of $1.77-$1.82, including currency headwinds of around 2 cents.
Shares of PM have rallied 8.3% in the past three months compared with the industry’s growth of 11%.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings indicates growth of 24.8% and 177.1%, respectively, from the prior-year reported level.
BRF (BRFS - Free Report) , which engages in raising, producing and slaughtering poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products, currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for BRF’s current financial-year sales and earnings suggests growth of 7.5% and 210%, respectively, from the year-ago reported figures.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, currently sports a Zacks Rank #1. The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings indicates growth of 22.6% and 64.4%, respectively, from the prior-year reported level.
VITL has a trailing four-quarter average earnings surprise of 102.1%.
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Philip Morris (PM) Ups View on Q2 Earnings Beat: Pricing Aids
Philip Morris International Inc. (PM - Free Report) posted strong second-quarter 2024 results, with the top and bottom lines exceeding the Zacks Consensus Estimate and revenues increasing year over year. While the bottom line dipped marginally, it showed double-digit growth, excluding currency headwinds.
Philip Morris continues to benefit from solid pricing and success in its smoke-free business, especially IQOS and ZYN. This Zacks Rank #2 (Buy) company expects to witness a robust second-half performance and raise its full-year guidance for 2024 despite the adverse currency movements.
Quarter in Detail
Adjusted earnings per share (EPS) came in at $1.59, which dropped 0.6% year over year while increasing 10.6%, excluding currency movements. Additionally, the bottom line beat the Zacks Consensus Estimate of $1.55.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Philip Morris International Inc. price-consensus-eps-surprise-chart | Philip Morris International Inc. Quote
Net revenues of $9,468 million increased 5.6% on a reported basis and 9.6% on an organic basis (excluding currency movements and acquisitions). Revenues came ahead of the Zacks Consensus Estimate of $9,158 million. The increase in organic revenues was backed by positive pricing variance (mainly backed by elevated combustible tobacco pricing) and favorable volume/mix (accountable to increased smoke-free product volumes).
During the quarter, net revenues from combustible products increased 1.2% and 4.8% organically due to high single-digit pricing and solid industry volumes.
Revenues from the smoke-free business increased 13.6% (up 18.3% on an organic basis) and formed 38.1% of the company’s total revenues (up by 2.7 percentage points compared with the year-ago period). Within the smoke-free business, the inhalable smoke-free products (SFP) were driven by strength in IQOS, while oral SFP was fueled by increased shipment volumes of ZYN.
Total shipment volumes (including heated tobacco units, oral SFP and cigarettes) increased 2.8% to 197.3 billion units in the second quarter.
The adjusted operating income ascended 12.5% on an organic basis to $3,656 million due to improved pricing variance and a positive volume/mix, somewhat negated by increased costs, mainly marketing, administration and research costs.
Region-Wise Performance
Net revenues in the European region grew 7% on an organic basis to $3,815 million. This was a result of favorable pricing and volume/mix. Total shipment volumes in the region increased 1.7% to 56.4 billion units.
In the SSEA, CIS & MEA regions, net revenues increased 13.3% organically to $2,771 million on improved pricing variance and a favorable volume/mix. Total shipment volumes rose by 4.5% to 94.3 billion units.
In the EA, AU & PMI DF regions, net revenues grew 6.7% organically to $1,673 million on favorable volume/mix and pricing variance. Total shipment volumes in the region climbed 1% to 27.3 billion units.
Revenues in the Americas surged 14.2% on an organic basis to $1,129 million. This was a result of the positive volume/mix and pricing. Total shipment volumes decreased 3.6% to 15.1 billion units.
Other Updates
Revenues from the Wellness and Healthcare unit improved 5.3% year over year on an organic basis to $80 million. Management expects 2024 net revenues and the adjusted operating loss in the Wellness and Healthcare segment to remain mostly unchanged from 2023.
Philip Morris ended the quarter with cash and cash equivalents of $4,807 million, long-term debt of $44,647 million and a total shareholder deficit of $7,942 million.
Philip Morris declared a quarterly dividend of $1.30 per share. However, the company stated that it would not make share repurchases in 2024.
2024 Guidance
Adjusted EPS for 2024 is envisioned in the $6.33-$6.45 range, suggesting 5.3-7.3% growth. Adjusted EPS, excluding currency, is likely to be in the $6.67-$6.79 band, indicating a year-over-year increase of 11-13%.
For the full year 2024, PM expects reported EPS in the band of $5.89-$6.01 compared with the $5.02 reported in 2023. Adjusted EPS was previously anticipated between $6.19 and $6.31 earlier, whereas adjusted EPS, excluding currency, was envisioned in the $6.55-$6.67 range. Further, the reported EPS was expected to be $5.70-$5.82.
The total international industry volume for cigarettes and HTUs (excluding China and the United States) is likely to remain mostly stable in 2024. This compares with the prior view of a decline of 2% to flat. The total cigarette, HTU and oral smoke-free product shipment volume for Philip Morris is likely to rise 1-2%, driven by smoke-free product strength compared with the previous view of flat to an increase of 1%.
Nicotine pouch shipment volumes in the United States are now expected between 560 and 580 million cans for 2024, up from nearly 560 cans guided before.
For 2024, PM now expects net revenues to increase 7.5-9% on an organic basis compared with 7-8.5% growth expected before. The operating income on an organic basis is likely to increase 11-13%, up from the 10-12% growth forecasted earlier. Management expects an acceleration in organic smoke-free net revenue and gross profit increase from 2023.
Management expects operating cash flow of around $11 billion in 2024 compared with the earlier view of $10-$11 billion. Capital expenditures are likely to be $1.3-$1.4 billion now, including additional investments in ZYN. This was earlier projected to be about $1.2 billion.
For the third quarter of 2024, Philip Morris envisions adjusted EPS in the band of $1.77-$1.82, including currency headwinds of around 2 cents.
Shares of PM have rallied 8.3% in the past three months compared with the industry’s growth of 11%.
3 Other Staple Bets Looking Good
Freshpet, Inc. (FRPT - Free Report) , a pet food company, has a trailing four-quarter earnings surprise of 118.2%, on average. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings indicates growth of 24.8% and 177.1%, respectively, from the prior-year reported level.
BRF (BRFS - Free Report) , which engages in raising, producing and slaughtering poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products, currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for BRF’s current financial-year sales and earnings suggests growth of 7.5% and 210%, respectively, from the year-ago reported figures.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, currently sports a Zacks Rank #1. The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings indicates growth of 22.6% and 64.4%, respectively, from the prior-year reported level.
VITL has a trailing four-quarter average earnings surprise of 102.1%.