Philip Morris beat earnings estimates. Why his stock is down.

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Philip Morris sees momentum accelerating for its reduced risk products.

Fabrice Coffrini / AFP via Getty Images

Philip Morris International

the stock was down on Tuesday, following the tobacco giant’s second quarter results, with the market reacting to the full-year forecast slightly below expectations. Its CFO says the company continues to “move in the right direction.”

Philip Morris (ticker: PM) said he earned $ 2.17 billion, or $ 1.39 per share, up from $ 1.25 per share a year ago. On an adjusted basis, which excludes one-time items, earnings were $ 1.57 per share. Revenue soared 14% to $ 7.59 billion. Analysts were looking for EPS of $ 1.55 for revenue of $ 7.67 billion.

Smokeless products accounted for 29% of sales in the quarter, while the company’s modified risk product, IQOS, which heats tobacco instead of burning it, had more than 20 million users at the end of the quarter. . The volume of cigarettes climbed 3.2%, while the volume of heated tobacco shipments increased by more than 30%.

For the full year, Philip Morris said he now expects to earn between $ 5.76 and $ 5.86 per share, down from an earlier range of $ 5.93 at 6 $ 03, citing asset write-downs and Saudi Arabia’s customs valuations, which the company had previously warned against. On an adjusted basis, he sees EPS of between $ 5.97 and $ 6.07, two cents higher than his old forecast, but lower than the $ 6.08 per share requested by consensus. Philip Morris forecasts organic net sales growth of 6-7%.

He also announced that his board of directors had authorized a new three-year, $ 7 billion share buyback program, starting in the third quarter.

Philip Morris CFO Emmanuel Babeau spoke with Barron following the report, saying he was “very satisfied with another very strong quarter”.

Babeau notes that year-over-year comparisons were easy, given the impact of Covid-19 in 2020, but even putting that advantage aside, there was a lot to like about the quarter: IQOS has maintained its strength since the first quarter, and the profitability of this product has also resulted in higher margins.

Philip Morris noted that the heated tobacco market share in markets where IQOS is available, excluding the United States, climbed to 7.3% in the quarter. Babeau says that “awareness is paramount” in terms of new reduced risk products, and that “in a number of regions we started from scratch, but now we are seeing a snowball effect – the brand is gaining visibility and smokers discover product. “

Although the markets vary, he is satisfied with the performance of IQOS in a number of key countries, from Russia to Western Europe, and there are now eight countries in the European Union where IQOS holds more than 10%. market share. The company estimates that around 14.7 million IQOS users have quit smoking.

As for the pandemic, which has once again made headlines around the world amid the virulent spread of the Delta variant, Babeau notes that he doesn’t expect “normalcy” to return for several months. However, the picture, at least in many developed countries, is brightening up as more people receive vaccines. Traditional cigarette smoking tends to increase in social settings, such as bars and clubs, and it is optimistic that as consumers regain more freedom with inoculation, this will be a positive for this. business.

Shares of Philip Morris are down 3.7% to $ 94.31 on recent trading, although shares have gained more than 15% year-to-date and are up 25.5% year-to-date last.

Write to Teresa Rivas at [email protected]


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