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Philip Morris (PM) Q4 Earnings Lag Estimates, Revenues Rise

Philip Morris International Inc. PM posted fourth-quarter 2023 results, wherein the bottom line fell short of the Zacks Consensus Estimate. However, the top line increased year over year and beat the Zacks Consensus Estimate. The company continued to benefit from pricing power, along with strength in IQOS and ZYN.

The company entered 2024 on a solid note and expects it to be another strong year, backed by organic smoke-free net revenue and profit growth

Quarter in Detail

Adjusted earnings per share (EPS) came in at $1.36, which dropped 2.2% year over year. However, the bottom line fell short of the Zacks Consensus Estimate of $1.44. The bottom line increased 12.2%, excluding currency movements.

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 $9,047 million increased 11% on a reported basis and 8.3% on an organic basis (excluding currency movements and acquisitions). The Zacks Consensus Estimate for the top line was pegged at $8,959 million. The increase in organic revenues was backed by higher pricing variance (mainly backed by elevated combustible tobacco pricing) and a positive volume/mix (accountable to increased heated tobacco unit or HTU volumes).

During the quarter, net revenues from combustible products were up 5.3% to $5,489 million (also up 5.3% on an organic basis). Revenues from smoke-free products (excluding Wellness and Healthcare) jumped 21.7% to $3,489 million (up 14.2% organically).

Net revenues from smoke-free products formed 39.3% of the company’s total revenues. Total IQOS users at the end of 2023 were estimated at roughly 28.6 million, up 3.7% year over year. This includes nearly 20.8 million who switched to IQOS and stopped smoking.

Total cigarette and HTU shipment volumes fell by 0.5% to 185.1 billion units in the quarter. HTU shipment volumes of 34 billion units rose 6.1% year over year, and Oral Products shipment volumes more than doubled to $219.6 million cans.

The adjusted operating income ascended 8% on an organic basis to $3,052 million due to improved pricing variance, somewhat negated by increased marketing, administration and research costs (stemming from inflation) as well as escalated manufacturing costs.

Region-Wise Performance

Net revenues in the European region grew 9.6% on an organic basis to $3,614 million. This was a result of favorable pricing and volume/mix. Total shipment volumes in the region increased 2.6% to 53.6 billion units.

In the SSEA, CIS & MEA regions, adjusted net revenues increased 13% organically to $2,707 million on improved pricing variance and a favorable volume/mix. Total shipment volumes rose by 0.5% to 90.5 billion units.

In the EA, AU & PMI DF regions, net revenues dipped 0.1% organically to $1,430 million due to the adverse volume/mix, mostly offset by better pricing variance. Total shipment volumes in the region tumbled 7.5% to 23.2 billion units.

Revenues in the Americas dropped 4.9% on an organic basis to $545 million. This was a result of an adverse volume/mix, partly made up by improved pricing. Shipment volumes decreased 5.1% to 17.7 billion units.

Other Updates

Philip Morris became the majority owner of Swedish Match on Nov 11, 2022. In the fourth quarter, revenues from the segment came in at $682 million, which increased 25.7%, excluding currency movements. The upside was mainly backed by solid growth in smoke-free products, with a spectacular performance of ZYN in the United States. On its fourth-quarter 2023 earnings call, management announced that the results of Swedish Match would be included in the four geographic segments from the first quarter of 2024.

Revenues from the Wellness and Healthcare unit declined 11.1% year over year on an organic basis to $69 million.

Management expects 2024 net revenues and 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 $3,060 million, long-term debt of $41,243 million and a total shareholder deficit of $9,446 million.

In September 2023, the company raised its quarterly dividend by 2.4%, taking it to $1.30 per share.

2024 Guidance

For the full year 2024, PM expects reported EPS in the band of $5.90-$6.02 compared with the $5.02 reported in 2023. Excluding an adjustment of 42 cents and a currency headwind of 11 cents pertaining to 2024, the expected EPS indicates a 7-9% increase from the adjusted EPS of $6.01 in 2023.

The total international industry volume for cigarettes and HTUs is estimated in the range of a decline of 2% to flat (excluding China and the United States).

The total cigarette, HTU and oral smoke-free product shipment volume increase for Philip Morris is likely to be flat and rise 1%, backed by smoke-free product strength. Management expects an adjusted in-market volume increase of 14-16% for HTUs.

For 2024, PM expects net revenues to increase 6.5-8% on an organic basis. The operating income on an organic basis is likely to increase 8-9.5%. Management expects an acceleration in organic smoke-free net revenue and gross profit increase from 2023.

Management expects operating cash flow of $10-$11 billion in 2024. Capital expenditures are likely to be around $1.2 billion. Philip Morris stated that it would not make share repurchases in 2024. For the first quarter of 2024, Philip Morris envisions adjusted EPS in the band of $1.37-$1.42, including currency headwinds of around 10 cents.

Shares of this Zacks Rank #3 (Hold) company have increased 1.8% in the past three months compared with the industry’s growth of 0.5%.

3 Solid Picks

Chewy CHWY, a trusted destination for pet parents and partners everywhere, currently sports a Zacks Rank #1 (Strong Buy). CHWY has a trailing four-quarter earnings surprise of 234.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Chewy’s current financial-year sales and earnings indicates growth of 10.3% and 11.3%, respectively, from the year-ago reported numbers.

Ingredion Incorporated INGR, which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2 (Buy). INGR delivered a positive earnings surprise of 6.5% in the last reported quarter.

The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings suggests growth of around 5% and 3.5%, respectively, from the year-ago reported numbers.

Casey's General Stores CASY, the third largest convenience retailer and fifth largest pizza chain in the United States, currently sports a Zacks Rank #1. CASY has a trailing four-quarter earnings surprise of 17.8%, on average.

The Zacks Consensus Estimate for Casey's current financial-year sales and earnings suggests growth of around 0.3% and 9%, respectively, from the year-ago reported numbers.

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