Things Worth Noting Before Philip Morris' (PM) Q2 Earnings
Philip Morris International Inc. PM is likely to register top and bottom-line growth, when it reports second-quarter 2021 numbers on Jul 20. The Zacks Consensus Estimate for revenues is pegged at $7,834 million, suggesting a jump of 17.8% from the prior-year quarter’s reported figure. In the last reported quarter, the tobacco giant witnessed a 6% increase in net revenues.
The Zacks Consensus Estimate for earnings has risen by a notch over the past seven days to $1.54 per share, which suggests growth of 19.4% from the figure reported in the prior-year period. The company has a trailing four-quarter earnings surprise of 9.3%, on average. In the last reported quarter, Philip Morris posted an earnings surprise of 12.1%.
Philip Morris International Inc. Price, Consensus and EPS Surprise
Philip Morris International Inc. price-consensus-eps-surprise-chart | Philip Morris International Inc. Quote
Key Factors to Note
Philip Morris has been benefiting from its strong pricing power. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes.
Focus on reduced risk products (RRPs), with consumers’ rising inclination toward low-risk alternatives, has been working well for Philip Morris. The company has been progressing well with its business transformation, with 10.8% of shipment volumes and 23.8% of net revenues coming from smoke-free products as of the end of 2020.
Toward this end, the company’s IQOS, a smokeless cigarette, counts among one of the leading RRPs in the industry. These next-generation devices are backed by substantial scientific insights and research. Total users of IQOS, as of the end of the first quarter, were estimated to be about 19.1 million, including roughly 14 million users who have shifted from smoking to IQOS.
The company expects consistent growth in the heated tobacco category, and therefore has been committed to expanding these products. Heated tobacco shipment volumes are envisioned in a band of 95-100 billion units for 2021.
That said, Philip Morris’ duty-free business has been soft amid the pandemic and management recently informed that it does not expect a near-term recovery in the duty-free business due to travel-related uncertainties. Receding cigarette sales volumes have also been a concern for the company.
Apart from pandemic-related hurdles, cigarette shipment volumes are long being adversely impacted by lower demand for cigarettes, stemming from anti-tobacco campaigns and consumers’ rising health consciousness. Regulatory hurdles have also created limitations for marketing cigarettes, hindering its sales volumes. Total cigarette and heated tobacco unit shipment volume growth is expected between a decline of 2% to growth of 1% in 2021.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Philip Morris this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Philip Morris currently has a Zacks Rank #3 and an Earnings ESP of +0.54%.
Other Stocks With Favorable Combinations
Here are some other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
Mondelez International MDLZ has an Earnings ESP of +4.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medifast MED has an Earnings ESP of +6.85% and a Zacks Rank of 2.
The Hershey Company HSY has an Earnings ESP of +0.71% and a Zacks Rank #3.
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