Philip Morris International Inc. The PM, in his address to investors at the Morgan Stanley Virtual Global Consumer & Retail conference, indicated that recent currency volatility could adversely impact its earnings in 2021 and 2022. However, PM is seeing strong momentum in IQOS and expects sequential growth in IQOS users for the fourth quarter.
At current rates, the company is expected to record a favorable currency impact of 14 cents per share on 2021 earnings per share, compared to the favorable impact of 17 cents mentioned previously. PM noted that the other underlying assumptions for the profit forecast for 2021 remained unchanged.
On an adjusted basis, earnings per share for 2021 is expected to reflect an unfavorable currency effect of 40 cents per share. Based on these assumptions, the company forecasts earnings per share (on a reported basis) of $ 5.74 to $ 5.79 versus $ 5.77 to $ 5.82 previously mentioned. Adjusted earnings per share is expected to be $ 5.98 to $ 6.03, down from $ 5.17 in 2020. On a currency neutral basis, the company expects adjusted earnings per share of $ 5.84 to $ 5.89, suggesting 13-14% year-over-year growth. The company also said it will present its forecast for 2022 in February 2022.
Philip Morris is credited with developing low risk alternatives in an environment where consumers switch from cigarettes to other reduced risk products (“RRPs”). The company’s IQOS, a device that does not burn, is one of the most popular RRPs in the industry. He also made radical advancements in the respiratory medication delivery platform as part of the “Beyond Nicotine” strategy. Its pricing power has also been a key catalyst for the company’s revenue growth.
Philip Morris’ IQOS is doing well in various markets globally. He launched IQOS in the United States in 2019 through a trade agreement with Altria Group, Inc. MO that the FDA has approved. Since then, Philip Morris has extended the brand by introducing its new versions with improved functionality. The company is well positioned to become a majority smoke-free business by 2025.
Altria is another company responding to the changing market scenario by offering several oral and heated tobacco products. Altria (through its subsidiary Helix Innovations) has full global ownership of on! – a popular tobacco-derived nicotine sachet (TDN) product. The management believes in it! is a worthwhile addition to Altria’s smoke-free portfolio as oral TDN products are gaining popularity in the United States due to their low risk claims. Management continues to expand the manufacturing capacity as well as the commercial availability of the product.
Going back to Philip Morris, in February 2021, the company revealed its intention to generate at least $ 1 billion in net annual revenue from “Beyond Nicotine” products by 2025. The initiative s ‘draws on PM’s expertise in life sciences, inhalation technology, and natural ingredients, among others. . As part of this strategy, the company made three takeovers in the third quarter, including Vectura Group plc, Fertin Pharma A / S and OtiTopic.
Driven by the success of these plans, Zacks Rank # 3 (Hold) stock has risen 4.9% year-to-date compared to industry growth of 0.2%.
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However, Philip Morris said the global semiconductor tightness is causing a shortage of IQOS devices, hampering the assortment and availability of these devices in multiple markets. This is also the reason for the decline in growth rates of IQOS users in the third quarter. The company expects the tight supply scenario to persist in the first half of 2022. Management expects the organic growth rate for the full year of 2022 to be lower than the growth expectations of the company. period 2021-2023 due to the supply situation of IQOS devices.
When announcing third quarter 2021 results, management stressed that it only expects a limited recovery in duty-free sales in the fourth quarter, after seeing a slight improvement in the third quarter as travel intercontinental and Asia remain moderate. The company expects pandemic hurdles in some markets to persist in the fourth quarter, particularly in South and Southeast Asia. In addition, he anticipates difficult comparisons in Germany and Australia.
Actions to watch
We have highlighted some better-ranked stocks from the broader consumer staples space, namely United natural foods UNFI and Hershey HSY.
United Natural currently sports a Rank 1 of Zacks (strong buy). The company has a surprise earnings for the last four quarters of 13.1%, on average. UNFI shares have jumped 196.8% year-to-date.
You can see The full list of today’s Zacks # 1 Rank stocks here.
Zacks Consensus Estimate for Current Year Sales of United Natural Suggests Growth of 4.1% and Earnings Per Share Growth of 5.2% Over Last Year’s Number .
Hershey, a Zacks Rank # 2 (Buy) stock now, has a surprise four-quarter earnings of 4.4%, on average. HSY shares have gained 15.2% year-to-date.
Zacks’ consensus estimate for Hershey’s sales and earnings per share for the current fiscal year suggests growth of 8.9% and 12.6%, respectively, from figures released last year.
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