What are Philip Morris (PM) expectations in the short term?

Shares of Philip Morris International Inc. (NYSE: PM) fell 1% on Thursday. The stock has fallen more than 9% since the start of the year. Although the tobacco industry felt the pinch of inflation, the addictive nature of cigarettes kept demand for Philip Morris products relatively stable. The company also benefits from its investments in smoke-free products such as IQOS. Here is an overview of the company’s near-term expectations:

Revenue

In the second quarter of 2022, Philip Morris recorded growth of 6.2% in its pro forma adjusted net sales on an organic basis. This was driven by pro forma total shipment volume growth of 3%, helped by a 2.4% increase in cigarettes and a 7.4% increase in heated tobacco units.

Pro forma adjusted net revenue per unit increased 3% on an organic basis, reflecting a higher proportion of heated tobacco units in the sales mix and higher prices. Pro forma fuel product prices increased 3.5% in the second quarter.

For the full year 2022, pro forma adjusted net revenue is expected to grow approximately 6-8% on an organic basis. For the third quarter of 2022, pro forma net sales are expected to grow mid-single digit on an organic basis.

Profitability and margins

In the second quarter, Philip Morris achieved reported EPS of $1.43, up 3% year-over-year. Adjusted EPS was $1.48 while Pro Forma Adjusted EPS totaled $1.32, reflecting currency neutral growth of 3.8% and 5.6% respectively.

Pro forma adjusted operating margin decreased by 1.9 points on an organic basis during the quarter, mainly due to investments in the smoke-free portfolio, supply chain disruptions, cost inflation and a difficult comparison with the previous year which included substantial productivity gains.

For the third quarter of 2022, pro forma adjusted EPS is expected to be between $1.23 and $1.28. For the full year, reported EPS is expected to be $5.73-5.88, while adjusted EPS is estimated at $5.90-6.05. Pro forma adjusted EPS, excluding currency, is expected to be between $6.09 and $6.20, representing a year-over-year increase of 10-12%.

Pro forma adjusted operating income should be stable at 50 basis points on an organic basis, mainly due to a favorable evolution of the product mix from cigarettes to smokeless products as well as continued investments in the smokeless portfolio. smoke. Gross margin is expected to be lower due to growth in IQOS device volumes, higher initial cost of IQOS ILUMA devices, higher logistics costs, investments in the Smoke-Free Wallet and higher inflation.

volumes

For the full year 2022, Philip Morris expects pro forma growth in total unit shipment volume of cigarettes and heated tobacco of c. 1.5-2.5%. The pro forma heated tobacco unit shipment volume is expected to be 90-92 billion units.

Click here to read the full transcript of the Philip Morris International Second Quarter 2022 Earnings Conference Call

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