Why Is Philip Morris (PM) Down 0.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Philip Morris (PM). Shares have lost about 0.8% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Philip Morris due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. PM Q3 Earnings Top Estimates on Combustible Pricing, 2024 View UpPhilip Morris posted strong third-quarter 2024 results, wherein adjusted EPS came in at $1.91, which increased 14.4% year over year. Excluding currency effects, the adjusted EPS jumped 18%. The bottom line beat the Zacks Consensus Estimate of $1.83. Net revenues of $9,911 million increased 8.4% on a reported basis and 11.6% on an organic basis (excluding currency movements and acquisitions).Revenues came ahead of the Zacks Consensus Estimate of $9,571 million. The increase in organic revenues was backed by positive pricing variance (mainly backed by elevated combustible tobacco pricing) and favorable volume/mix (accountable to increased smoke-free product volumes).During the quarter, net revenues from combustible products increased 5.2% and 8.6% organically due to high single-digit pricing and robust industry volumes. Revenues from the smoke-free business increased 14.2% (up 16.8% on an organic basis) and formed 38% of the company’s total revenues (up by 1.9 percentage points compared with the year-ago period). Within the smoke-free business, inhalable smoke-free products (SFP) were driven by strength in IQOS, while oral SFP was fueled by increased shipment volumes of ZYN. Total shipment volumes (including heated tobacco units, oral SFP and cigarettes) increased 2.9% to 203 billion units in the third quarter.The adjusted operating income ascended 11.2% (up 13.8% on an organic basis) to $4,153 million due to improved pricing variance and a positive volume/mix, somewhat negated by increased manufacturing costs, mainly associated with tobacco leaf, as well as higher marketing, administration and research costs. The adjusted operating margin grew 1.1 percentage points or pp (up 0.9 pp organically) to 41.9%.Decoding PM’s Region-Wise PerformanceNet revenues in the European region grew 8.7% on an organic basis to $4,121 million. This was a result of favorable pricing and volume/mix. Total HTU and cigarette shipment volumes in the region increased 2.5% to 57.9 billion units. In the SSEA, CIS & MEA regions, net revenues increased 12.1% organically to $2,964 million on improved pricing variance and a favorable volume/mix. Total shipment volumes rose by 3.2% to 98.6 billion units.In the EA, AU & PMI DF regions, net revenues grew 7.4% organically to $1,602 million on favorable volume/mix and pricing variance. Total shipment volumes in the region climbed 2.4% to 26.7 billion units. Revenues in the Americas surged 30.5% on an organic basis to $1,148 million. This was a result of the positive volume/mix and pricing. Total cigarette and HTU shipment volumes in the Americas dipped 1.1% to 15.4 billion units.Philip Morris: Other UpdatesIn September 2024, Philip Morris unveiled the sale of its subsidiary, Vectura Group Ltd. (Vectura), to Molex Asia Holdings Ltd., along with the creation of master service agreements to advance Vectura Fertin Pharma’s proprietary inhaled therapeutics pipeline. The deal is expected to conclude by the end of 2024. The remaining divisions of Vectura Fertin Pharma will continue to operate independently under Philip Morris’ ownership, adopting a new corporate identity.Revenues from the Wellness and Healthcare unit improved 2.7% year over year on an organic basis to $76 million. Management expects 2024 net revenues and the 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 $4,258 million, long-term debt of $44,237 million and a total shareholder deficit of $7,713 million. Philip Morris raised its quarterly dividend by 3.8% to $1.35 per share. However, the company stated that it would not make share repurchases in 2024.What to Expect From PM in 2024?Adjusted EPS for 2024 is now envisioned in the $6.45-$6.51 range, suggesting 7.3-8.3% growth. Adjusted EPS, excluding currency, is likely to be in the $6.85-$6.91 band, indicating a year-over-year increase of 14-15%. For full-year 2024, PM expects reported EPS in the band of $6.20-$6.26 compared with the $5.02 reported in 2023. Adjusted EPS for 2024 was earlier anticipated in the $6.33-$6.45 range, suggesting 5.3-7.3% growth. Adjusted EPS, excluding currency, was expected to be in the $6.67-$6.79 band, indicating a year-over-year increase of 11-13%. For full-year 2024, PM earlier projected reported EPS in the band of $5.89-$6.01.The total international industry volume for cigarettes and HTUs (excluding China and the United States) is likely to grow up to 1% in 2024. This compares with the prior view of mostly stable. The total cigarette, HTU and oral smoke-free product shipment volume for Philip Morris is likely to rise 2-3% now, driven by smoke-free product strength compared with the previous view of 1-2% growth. Nicotine pouch shipment volumes in the United States are now expected between 570 and 580 million cans for 2024 compared with 560 and 580 cans guided before.For 2024, PM now expects net revenues to increase 9.5% on an organic basis compared with 7.5-9% growth expected before. The operating income on an organic basis is likely to rise 14-14.5%, up from the 11-13% growth forecasted earlier. Management expects an acceleration in organic smoke-free net revenue and gross profit increase from 2023. Management expects operating cash flow of around $11 billion in 2024. Capital expenditures are likely to be $1.4 billion, including additional investments in ZYN.How Have Estimates Been Moving Since Then?It turns out, estimates revision have trended downward during the past month.VGM ScoresCurrently, Philip Morris has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Philip Morris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Philip Morris International Inc. (PM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks