Phillip Morris International Inc. (PM) reported an increase in its revenue of 7.6%, to $8.1 billion in Q32021 from $7.4 billion in Q32020.
Operating income increased by 9.4% to $3.5 billion in Q32021 from $3.2 billion in Q32020. The increase in revenues is attributable to smoke-free products, 28.6% of which is generated in Japan on the back of the launch of their new IQOS ILUMA product (a heated tobacco consumption device), which promotes their smoke-free strategy. The estimated number of users is 20.4 million users, leading to a market share of 6.8% (excluding US), an increase of 1.2%. The number of IQOS users grew by 300k in Q32021, compared to 1 million in Q22021 which is impacted by a current global shortage of semiconductors, which is seen as a temporary phenomenon due to the pandemic that is seen as easing through the second quarter of 2022. This is seen as impacting the number of expected new users of IQOS in the coming months through the first half of 2022.
The COVID-19 pandemic impacted PM’s revenue (especially in Duty and Emerging markets) with the volume of cigarette sales declining by 0.4% and heated tobacco units volume up by 23.8%. These figures are expected to improve as the pandemic ends and the supply chain disruptions are reduced.
The adjusted EPS was $1.58 for Q32021, increasing by 11.3% compared to Q32020, and beating estimates of $1.38. Looking ahead, EPS is expected to remain steady at $1.38 for the fourth quarter, while an announced $7 billion buyback program is seen as supportive EPS and the share price in the near term.
The company’s CEO (Jacek Olczak) was reported saying, “Our business delivered another strong quarterly performance, coming ahead of our expectations with adjusted diluted EPS of $1.58, representing growth of 8.5%, excluding currency,”. Furthermore, “We confirm our confidence in our 2021 to 2023 growth targets, despite device constraints that could persist into the first half of 2022, with temporarily lower IQOS user growth rates.” PM continues to invest in the vapor market, with the launch of its “VEEP” product.
The share price reacted to the announcement, initially rising in pre-market trading before closing –1.4% lower at $97.45. Of the 21analysts covering the stock, 69% have a buy rating, with 32% having a hold rating on the stock with an average price 12-month price target of $111.50.
