Philip Morris International Inc. (NYSE: $PM) is a global tobacco company focusing on a smoke-free future. Its long-term plan includes creating products outside the tobacco and nicotine industries.
The company’s current offering consists of cigarettes and smoke-free products for adults who would otherwise smoke. Its smoke-free products are available in 78 markets to around 18.5 million adults globally.
Latest Earnings Report
Philip Morris International released its fiscal Q3 earnings report on October 19, 2023. The report delivered better-than-expected earnings per share of $1.67 against an expected $1.61, a surprise of 3.76%. Revenue was at $9.14 billion, against an expected $9.20 billion, a surprise of -0.60%.
The revenue posted in Q3 represented a year-on-year growth of 13.8%, compared to last year’s revenue of $8.03 billion in the same quarter. At the same time, it reported that operating income was up 13.5% to $3.37 billion. The Marlboro cigarettes maker raised its full-year adjusted earnings guidance to $6.05-$6.08 per share, representing a growth of 10–15 percent.
The Q3 results represent the first time PM stock has topped $9 billion in reported quarterly revenue. Its smoke-free line of products led the growth, specifically IQOS heated tobacco products and Zyn nicotine pouches.
Philip Morris has taken steps to pivot from smoke-based tobacco products as the market has shrunk and regulation tightens in some key markets. The company’s shipment volume for heated tobacco products, including e-cigarettes, rose 18% in Q3.
At the same time, traditional cigarette volumes fell 0.5%, while net revenue for this category grew 4.3%, driven by higher pricing. Shipment volumes for Zyn pouches rose 65.7%, which surpassed projections.
The company acquired Zyn last year as part of its purchase of Swedish Match. The acquisition was part of several acquisitions aiming to pivot the company away from combustible cigarettes.
Philip Morris Stock Performance
PM stock took a 2% dive shortly after the earnings report came out, as it emerged that it had missed its projected revenue target. Additionally, the company revealed a lowered target for its full-year forecast shipment volumes for heated tobacco products.
It cited uncertainty in Europe, limited growth in Ukraine and Russia, and upcoming regulation on heated tobacco flavors in certain markets. Year-to-date, PM stock has lost 11.76% of its value. However, the stock was up 2.2% at the close of trading on October 30 at 04:00 PM EDT, trading at $89.39 per share.
Philip Morris Stock Forecast
Institutional investors hold a majority of PM stock. The data shows that they control 78.40% of the stock. Of these, the top 10 institutional shareholders control 45.03% of the stock. The large control by institutional investors has had a huge impact on the stock’s market performance.
While the stock has experienced a recent dip in value, investors who benchmark their performance against an index and prefer large companies in these indices continue to maintain a positive outlook. Many foresee growth prospects for Philip Morris, which has invested over $10 billion since 2008 in its pivot away from cigarettes.
However, there is still a huge risk of a major share decline if any major institutional investors were to sell their stake in PM stock. Such a scenario necessitates a comprehensive stock assessment that includes weighing potential risks against returns. Such a strategy will include keeping a close eye on the investment strategies of one of its top ten institutional investors. Any sudden change could trigger a cascade in the PM stock price.
Should You Invest in PM Stock
Philip Morris has a market cap of $138.77 billion with a P/E ratio 17.36. That indicates that the company’s current stock price is a fair valuation. In its latest quarterly report, revenue grew 13.8% year-over-year, with a 63.58% gross profit margin.
While its EPS has been in a declining trend, Philip Morris has remained profitable in the past 12 months. Based on these figures, Wall Street analysts give PM stock a strong buy rating. They predict an average price target, representing an upside of 21.21% from the current price.
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