Philip Morris (NYSE: PM) earnings release for the 2nd quarter of their 2020 fiscal year
Category: Stock Market and Philip Morris (PM)
Date: 21 July 2020 Stock Price of Philip Morris : $75.80 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Philip Morris, the world's biggest cigarette manufacturer, and owner of Marlboro cigarettes and heated tobacco brand IQOS, whose revenues topped $17.8 billion for the quarter, down -10.8% from the same quarter of the previous year.
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Despite a very challenging quarter due to the pandemic, we delivered results above our previously communicated expectations for both net revenues and reported diluted EPS - André Calantzopoulos, Chief Executive Officer. "
About Philip Morris
Philip Morris International Inc. is an American multinational cigarette and tobacco manufacturing company, with products sold in over 180 countries. The most recognized and best selling product of the company is Marlboro. Until a spin-off in March 2008, Philip Morris International was an operating company of Altria
Overview of Philip Morris' 2nd quarter 2020 earnings report
Data below refers to the latest quarter unless specified otherwise:
- Revenues: $17.819 billion (down from $19.987 billion for the same period of the previous year)
- Revenues decreased by -10.8% over the last 12 months
- Cost of goods sold: $2.179 billion (down from $2.665 billion for the same period of the previous year)
- Cost of goods sold decreased by -18% over the last 12 months
- Net earnings: $1.947 billion (down from $2.319 billion for the same period of the previous year)
- Diluted earnings per share: $1.25 (down from $1.49 for the same period of the previous year)
- PE ratio: 15
- Diluted weighted-average shares outstanding: 1.557 billion (up from 1.556 billion for the same period of the previous year)
- Cash and cash equivalents: $4.2 billion
- Cash and cash equivalents per share: $2.69
- Cash and cash equivalents makes up 5.04% of Philip Morris' market capital
- Cash and cash equivalents makes up 10.7% of Philip Morris' total assets
- Goodwill: $5.653 billion
- Essentially the goodwill shows the value of Philip Morris' brand names.
- Goodwill per share: $3.63
- We therefore estimate that 4.8% of Philip Morris' stock price is made up by the value of their brand's
- Goodwill makes 14.4% of of Philip Morris' total assets
Philip Morris' management commentary on their 2nd quarter 2020 earnings report
NEW YORK, July 21, 2020 – Philip Morris International Inc. (NYSE: PM) today announces its 2020 second-quarter results. Comparisons presented in this press release on a "like-for-like" basis reflect pro forma 2019 results, which have been adjusted for the deconsolidation of PMI's Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), effective March 22, 2019 (the date of deconsolidation). In addition, PMI's total market share has been restated for previous periods to reflect the deconsolidation.
"Despite a very challenging quarter due to the pandemic, we delivered results above our previously communicated expectations for both net revenues and reported diluted EPS," said André Calantzopoulos, Chief Executive Officer. "This primarily reflected favorable sequential performance in June, with a strong industry volume recovery -- notably in the higher margin EU Region -- and substantial IQOS user acquisition growth, as well as the benefit of certain non-underlying factors, some of which we expect to reverse in the third quarter."
"Despite a very challenging quarter due to the pandemic, we delivered results above our previously communicated expectations for both net revenues and reported diluted EPS," said André Calantzopoulos, Chief Executive Officer. "This primarily reflected favorable sequential performance in June, with a strong industry volume recovery -- notably in the higher margin EU Region -- and substantial IQOS user acquisition growth, as well as the benefit of certain non-underlying factors, some of which we expect to reverse in the third quarter."
Business Environment and Strategic Actions Update
Since the company's last earnings update in April, global unit case volume trends have improved sequentially, from a decline of approximately 25% in April to a decline of approximately 10% in June. Unit case volume for July month-todate was down mid single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels. The improvement in away-from-home trends during the quarter closely correlated with the easing of lockdowns, and the company expects this correlation to continue in the second half of 2020. While the company believes the second quarter will be the most severely impacted quarter of the year, given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown. The company's balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis. Despite the high degree of uncertainty, the company is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality. The company is accelerating its strategy to accomplish these goals. This includes focusing investments against a defined growth portfolio by prioritizing brands best positioned for consumer reach and share advantage. The company will also streamline the innovation pipeline against initiatives that are scalable regionally or globally as well as maintain a disciplined approach to local experimentation in order to further strengthen the company's leader, challenger and explorer framework. The portfolio will be supported by a refreshed marketing approach, with a stepchange in marketing investment effectiveness and efficiency. The company will also lead the Coca-Cola system in driving system-wide efficiencies to support these investments, and will invest in new capabilities to capitalize on emerging, lasting shifts in consumer behaviors
Company Updates
• Refresh the world, make a difference: In the midst of unprecedented challenges, the company remains grounded in its purpose. For example, The Coca-Cola Foundation has partnered with the world’s largest humanitarian network, the International Red Cross and Red Crescent Movement, to help provide hospitals with critical medical equipment and supplies; to support community relief programs; and to fund public coronavirus education and awareness campaigns. The partnership has supported programs in more than 60 countries, reaching an estimated 7.5 million people impacted by the pandemic.
• Driving relevance with loved brands: In the first original ad during the pandemic for brand Coca-Cola, the company celebrates the rediscovered joy in sharing a meal with loved ones. "The Great Meal" features 13 real households in eight countries preparing and sharing home-cooked meals over an ice-cold Coca-Cola, bringing to life the comfort and authenticity of the brand's connection to food. "The Great Meal" kicks off a global campaign for brand Coca-Cola, "Together Tastes Better," which is rolling out this month. This modular, digital-first campaign was created for Coca-Cola teams around the world to tailor and localize for their markets and platforms. "Together Tastes Better" is the latest example of how the company is leveraging marketing investments for the highest impact and largest reach.
• Innovating quickly to address consumer needs: The company recently announced plans to roll out a new pouring option to meet consumer needs with its latest Coca-Cola Freestyle technology innovation – contactless, mobile pouring using a smartphone. As the coronavirus pandemic continues to reshape consumer behaviors, the contactless Coca-Cola Freestyle solution allows consumers to choose and pour drinks in just a few seconds, without creating an account or downloading an app. The mobile experience is rolling out to Coca-Cola Freestyle dispensers across the United States by the end of the year.
• Addressing social justice concerns: The company is taking a multi-faceted approach to social justice, focusing on listening, leading, investing and advocating. This includes meeting with stakeholders, employees and other business leaders. The company has paused social media activity for July to review policies, including its own, and to hold partners to a higher level of accountability and transparency. The company has committed to spend an incremental $500 million with Black-owned suppliers over the next five years in the United States. In support of social justice, The Coca-Cola Foundation has contributed $4 million to several initiatives and, to date, the company has contributed an additional $1.3 million through brands Coca-Cola and Sprite.
Full Year 2020 Considerations
As the coronavirus pandemic continues to evolve, there is uncertainty around its ultimate impact; therefore, the company's full year financial and operating results cannot be reasonably estimated at this time. For comparable net revenues (non-GAAP), the company expects a 3% to 4% currency headwind based on the current rates and including the impact of hedged positions. 7 For comparable operating income (non-GAAP), the company expects a high single-digit currency headwind based on the current rates and including the impact of hedged positions. The company’s underlying effective tax rate (non-GAAP) is estimated to be 19.5%.
Since the company's last earnings update in April, global unit case volume trends have improved sequentially, from a decline of approximately 25% in April to a decline of approximately 10% in June. Unit case volume for July month-todate was down mid single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels. The improvement in away-from-home trends during the quarter closely correlated with the easing of lockdowns, and the company expects this correlation to continue in the second half of 2020. While the company believes the second quarter will be the most severely impacted quarter of the year, given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown. The company's balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis. Despite the high degree of uncertainty, the company is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality. The company is accelerating its strategy to accomplish these goals. This includes focusing investments against a defined growth portfolio by prioritizing brands best positioned for consumer reach and share advantage. The company will also streamline the innovation pipeline against initiatives that are scalable regionally or globally as well as maintain a disciplined approach to local experimentation in order to further strengthen the company's leader, challenger and explorer framework. The portfolio will be supported by a refreshed marketing approach, with a stepchange in marketing investment effectiveness and efficiency. The company will also lead the Coca-Cola system in driving system-wide efficiencies to support these investments, and will invest in new capabilities to capitalize on emerging, lasting shifts in consumer behaviors
Company Updates
• Refresh the world, make a difference: In the midst of unprecedented challenges, the company remains grounded in its purpose. For example, The Coca-Cola Foundation has partnered with the world’s largest humanitarian network, the International Red Cross and Red Crescent Movement, to help provide hospitals with critical medical equipment and supplies; to support community relief programs; and to fund public coronavirus education and awareness campaigns. The partnership has supported programs in more than 60 countries, reaching an estimated 7.5 million people impacted by the pandemic.
• Driving relevance with loved brands: In the first original ad during the pandemic for brand Coca-Cola, the company celebrates the rediscovered joy in sharing a meal with loved ones. "The Great Meal" features 13 real households in eight countries preparing and sharing home-cooked meals over an ice-cold Coca-Cola, bringing to life the comfort and authenticity of the brand's connection to food. "The Great Meal" kicks off a global campaign for brand Coca-Cola, "Together Tastes Better," which is rolling out this month. This modular, digital-first campaign was created for Coca-Cola teams around the world to tailor and localize for their markets and platforms. "Together Tastes Better" is the latest example of how the company is leveraging marketing investments for the highest impact and largest reach.
• Innovating quickly to address consumer needs: The company recently announced plans to roll out a new pouring option to meet consumer needs with its latest Coca-Cola Freestyle technology innovation – contactless, mobile pouring using a smartphone. As the coronavirus pandemic continues to reshape consumer behaviors, the contactless Coca-Cola Freestyle solution allows consumers to choose and pour drinks in just a few seconds, without creating an account or downloading an app. The mobile experience is rolling out to Coca-Cola Freestyle dispensers across the United States by the end of the year.
• Addressing social justice concerns: The company is taking a multi-faceted approach to social justice, focusing on listening, leading, investing and advocating. This includes meeting with stakeholders, employees and other business leaders. The company has paused social media activity for July to review policies, including its own, and to hold partners to a higher level of accountability and transparency. The company has committed to spend an incremental $500 million with Black-owned suppliers over the next five years in the United States. In support of social justice, The Coca-Cola Foundation has contributed $4 million to several initiatives and, to date, the company has contributed an additional $1.3 million through brands Coca-Cola and Sprite.
Full Year 2020 Considerations
As the coronavirus pandemic continues to evolve, there is uncertainty around its ultimate impact; therefore, the company's full year financial and operating results cannot be reasonably estimated at this time. For comparable net revenues (non-GAAP), the company expects a 3% to 4% currency headwind based on the current rates and including the impact of hedged positions. 7 For comparable operating income (non-GAAP), the company expects a high single-digit currency headwind based on the current rates and including the impact of hedged positions. The company’s underlying effective tax rate (non-GAAP) is estimated to be 19.5%.
Philip Morris (PM) stock price history
The image below, obtained from Google, shows the stock price history of Philip Morris over the last 5 years. And it's not been a good time for Philip Morris stockholders. 5 years ago the stock was trading at around $85.70 a stock and its currently trading at $75.80 a stock. That's loss of -11.5% suffered by Philip Morris stockholders over the last 5 years.
The stock of Philip Morris is trading at a lot closer to its 52 week high of $90.17 than it is to its 52 week low of $56.10, which to us is a clear indication that the short term sentiment and momentum towards Philip Morris' stock is positive at this point in time.
The stock of Philip Morris is trading at a lot closer to its 52 week high of $90.17 than it is to its 52 week low of $56.10, which to us is a clear indication that the short term sentiment and momentum towards Philip Morris' stock is positive at this point in time.
Philip Morris (PM) stock vs Altria (OM) stock over the last 3 years
The image below shows the stock price performance of Philip Morris and Altria over the last 3. years. These to firms are direct rivals in the tobacco and cigarette industry. The summary below shows the stock price performance of Philip Morris and Altria over the last 3 years
So the stock of Philip Morris has easily outperformed the stock of Altria over the last 3 years.
- Philip Morris: -12.7%
- Altria: -29.9%
So the stock of Philip Morris has easily outperformed the stock of Altria over the last 3 years.
Recent coverage of Philip Morris (PM)
The extract below covers the latest news regarding Philip Morris
Philip Morris International Inc. PM, +3.94% shares rose 3.3% in Tuesday premarket trading after the Marlboro parent reported second-quarter earnings and revenue that beat expectations. Net income totaled $1.95 billion, or $1.25 per share, down from $2.32 billion, or $1.49 per share, last year. Adjusted EPS was $1.29, well ahead of the FactSet consensus for $1.10. Revenue totaled $6.66 billion, down from $7.70 billion last year but ahead of the $6.50 billion FactSet consensus. Cigarette shipment volume was down 17.6% while heated tobacco unit shipment volume, which includes the company's IQOS product, was up 24.3% for the period. IQOS users totaled 15.4 million by quarter-end, of which Philip Morris says 11.2 million made the switch from cigarettes.
Philip Morris has been touting its heated tobacco product as an alternative to cigarettes, and recently got FDA approval to market the product as a "modified risk" item. The company says that certain cigarette production facilities have been impacted by COVID-19, but those facilities account for less than 5% of production capacity around the world. As of June 30, the company had approximately $4.2 billion of cash and cash equivalents on hand. For the full year, Philip Morris forecasts EPS of $4.84 to $4.99, and adjusted EPS of $4.92 to $5.07. The FactSet consensus is for EPS of $4.92. Philip Morris' forecast assumes that none of the company's key markets will undergo another lockdown, though the company doesn't anticipate a recovery in duty-free sales given uncertain global travel conditions. Philip Morris stock is down 14.3% for the year to date while the S&P 500 index SPX, +0.56% has edged up 0.7% for the period.
Read the full article here
Philip Morris International Inc. PM, +3.94% shares rose 3.3% in Tuesday premarket trading after the Marlboro parent reported second-quarter earnings and revenue that beat expectations. Net income totaled $1.95 billion, or $1.25 per share, down from $2.32 billion, or $1.49 per share, last year. Adjusted EPS was $1.29, well ahead of the FactSet consensus for $1.10. Revenue totaled $6.66 billion, down from $7.70 billion last year but ahead of the $6.50 billion FactSet consensus. Cigarette shipment volume was down 17.6% while heated tobacco unit shipment volume, which includes the company's IQOS product, was up 24.3% for the period. IQOS users totaled 15.4 million by quarter-end, of which Philip Morris says 11.2 million made the switch from cigarettes.
Philip Morris has been touting its heated tobacco product as an alternative to cigarettes, and recently got FDA approval to market the product as a "modified risk" item. The company says that certain cigarette production facilities have been impacted by COVID-19, but those facilities account for less than 5% of production capacity around the world. As of June 30, the company had approximately $4.2 billion of cash and cash equivalents on hand. For the full year, Philip Morris forecasts EPS of $4.84 to $4.99, and adjusted EPS of $4.92 to $5.07. The FactSet consensus is for EPS of $4.92. Philip Morris' forecast assumes that none of the company's key markets will undergo another lockdown, though the company doesn't anticipate a recovery in duty-free sales given uncertain global travel conditions. Philip Morris stock is down 14.3% for the year to date while the S&P 500 index SPX, +0.56% has edged up 0.7% for the period.
Read the full article here
Philip Morris (PM) latest stock valuation
So what is Philip Morris stock worth based on the release of their 2nd quarter 2020 earnings report ? Based on Philip Morris latest earnings report our valuation models provide a target price (full value price) of Philip Morris stock at $80 a stock. Based on our target price (full value price) we believe the stock of Philip Morris is close to being fully valued
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target price (full value price) which in this case is $80, so a good entry point into Philip Morris' stock would be at $72 or below. We expect the stock of Philip Morris (PM) to trade in a narrow range around its current price in coming weeks and months.
We usually recommend that long term fundamental or value investors look to enter the stock at 10% below our target price (full value price) which in this case is $80, so a good entry point into Philip Morris' stock would be at $72 or below. We expect the stock of Philip Morris (PM) to trade in a narrow range around its current price in coming weeks and months.
Next earnings release of Philip Morris
It is expected that Philip Morris (PM) will release their 3rd quarter 2020 earnings report in late October 2020