Philip Morris (NYSE: PM) earnings release for the 3rd quarter of their 2020 fiscal year
Category: Stock Market and Philip Morris (PM)
Date: 21 October 2020 Stock Price of Philip Morris : $75.80 We take a look at the 3rd 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 $20.4 billion for the quarter up 0.3% 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' 3rd quarter 2020 earnings report
Data below refers to the latest quarter unless specified otherwise:
- Revenues: $20.444 billion (up from $20.380 billion for the same period of the previous year)
- Revenues increased by 0.3% over the last 12 months
- Cost of goods sold: $2.416 billion (down from $2.605 billion for the same period of the previous year)
- Cost of goods sold decreased by -7.3% over the last 12 months
- Net earnings: $2.437 billion (up from $2.046 billion for the same period of the previous year)
- Diluted earnings per share: $1.48 (down from $1.49 for the same period of the previous year)
- PE ratio: 14.2
- Diluted weighted-average shares outstanding: 1.558 billion (up from 1.556 billion for the same period of the previous year)
- Cash and cash equivalents: $4.821 billion
- Cash and cash equivalents per share: $3.09
- Cash and cash equivalents makes up 4.2% of Philip Morris' market capital
- Cash and cash equivalents makes up 12.3% of Philip Morris' total assets
- Goodwill: $5.647 billion
- Essentially the goodwill shows the value of Philip Morris' brand names.
- Goodwill per share: $3.62
- 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 3rd quarter 2020 earnings report
NEW YORK, October 20, 2020 – Philip Morris International Inc. (NYSE: PM) today announces its 2020 third 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
"We delivered stronger-than-anticipated results in the third quarter, despite the ongoing challenges of the pandemic, with adjusted diluted EPS growth of 5.6% on an organic basis," said André Calantzopoulos, Chief Executive Officer. "The sustained momentum of IQOS was excellent, with an estimated 16.4 million total users at the end of September and smoke-free products accounting for nearly one-fourth of our total net revenues in the quarter. Furthermore, our combustible tobacco business recorded an improved sequential performance, supported by better underlying total industry volumes across both developed and emerging markets." "Despite continued headwinds for our duty-free business and in Indonesia, we are raising our full-year 2020 guidance and now anticipate adjusted diluted EPS growth of around 5% to 6% on an organic basis, compared to a range of approximately 3.5% to 5.0% previously."
"We delivered stronger-than-anticipated results in the third quarter, despite the ongoing challenges of the pandemic, with adjusted diluted EPS growth of 5.6% on an organic basis," said André Calantzopoulos, Chief Executive Officer. "The sustained momentum of IQOS was excellent, with an estimated 16.4 million total users at the end of September and smoke-free products accounting for nearly one-fourth of our total net revenues in the quarter. Furthermore, our combustible tobacco business recorded an improved sequential performance, supported by better underlying total industry volumes across both developed and emerging markets." "Despite continued headwinds for our duty-free business and in Indonesia, we are raising our full-year 2020 guidance and now anticipate adjusted diluted EPS growth of around 5% to 6% on an organic basis, compared to a range of approximately 3.5% to 5.0% previously."
COVID-19: Business Continuity Update
Since the onset of the COVID-19 pandemic, PMI has undertaken a number of business continuity measures to mitigate potential disruption to its operations and route-to-market in order to preserve the availability of products to its customers and adult consumers.
Currently:
PMI raises its full-year 2020 reported diluted EPS forecast to a range of $5.03 to $5.08, at prevailing exchange rates, compared to the previously communicated forecast range of $4.92 to $4.99, provided on September 10th.
This revision primarily reflects:
Since the onset of the COVID-19 pandemic, PMI has undertaken a number of business continuity measures to mitigate potential disruption to its operations and route-to-market in order to preserve the availability of products to its customers and adult consumers.
Currently:
- PMI has sufficient access to the inputs for its products and is not facing any significant business continuity issues with respect to key suppliers;
- The large majority of PMI's manufacturing facilities globally are currently operational, including all heated tobacco unit factories. Certain cigarette production facilities—accounting for less than 5% of PMI's total cigarette production capacity worldwide—are temporarily impacted by government-mandated shutdowns or production limitations;
- There are adequate inventories, based on existing sales trends, of PMI finished goods across all key markets for cigarettes and across all IQOS markets for heated tobacco units and tobacco heating devices;
- PMI does not anticipate out-of-stock situations in any major operating income markets and generally expects consumers to have adequate access to its products; and
- PMI has ample liquidity through cash on hand, the ongoing cash generation of its business, and its access to the commercial paper and debt markets
PMI raises its full-year 2020 reported diluted EPS forecast to a range of $5.03 to $5.08, at prevailing exchange rates, compared to the previously communicated forecast range of $4.92 to $4.99, provided on September 10th.
This revision primarily reflects:
- A favorable tax reporting item of $0.06 per share, recorded in the third quarter of 2020, related to U.S. tax regulations under the Tax Cuts and Jobs Act of 2017;
- Better-than-anticipated third-quarter total industry volume, notably in the EU Region and Indonesia, and the corresponding impact on PMI shipment volume; and
- A smaller expected fourth-quarter cigarette industry volume decline in Indonesia, and the corresponding impact on PMI shipment volume. Excluding an unfavorable currency impact, at prevailing exchange rates, of approximately $0.32 per share (compared to approximately $0.31 per share assumed previously), the favorable tax item of $0.06 per share, asset impairment and exit costs of $0.04 per share and the fair value adjustment for equity security investments of $0.04 per share, this forecast represents a projected increase of around 5% to 6% versus pro forma adjusted diluted EPS of $5.13 in 2019, as detailed in the above table.
Philip Morris (PM) stock price history over the last 5 years
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 $89.70 a stock and its currently trading at $73.98 a stock. That's loss of -17.5% 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: -28.1%
- Altria: -40%
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 as obtained from Barrons.com
Philip Morris International reported a fairly strong quarter earlier this week, but that did little to help the stock. That is further proof that the market is unfairly discounting tobacco, Citigroup argues.
Analyst Adam Spielman reiterated a Buy rating and $100 price target on Philip Morris (ticker: PM). He writes that Tuesday “was one of those results days when the share price reaction was more interesting than the press release,” as the shares—which were initially higher on the beat-and-raise report—ultimately fell nearly 6% by the close. He attributes the decline to “positioning and rotation. It shows (yet again) there is a disconnect in tobacco between fundamentals and the shares.”
Spielman notes that shipments of its heat-not-burn product IQOS were a bit below consensus, and Philip Morris’s market share growth slowed. Yet he says investors are overlooking that inventory issues weighed on the shipments to the tune of about 8%. Excluding that, underlying IQOS volumes were up 28% year over year, picking up steam from the second quarter. In addition, the number of users also grew by more than a million; there has only been one other quarter when it reported higher user growth, he notes.
Read the full article here
Philip Morris International reported a fairly strong quarter earlier this week, but that did little to help the stock. That is further proof that the market is unfairly discounting tobacco, Citigroup argues.
Analyst Adam Spielman reiterated a Buy rating and $100 price target on Philip Morris (ticker: PM). He writes that Tuesday “was one of those results days when the share price reaction was more interesting than the press release,” as the shares—which were initially higher on the beat-and-raise report—ultimately fell nearly 6% by the close. He attributes the decline to “positioning and rotation. It shows (yet again) there is a disconnect in tobacco between fundamentals and the shares.”
Spielman notes that shipments of its heat-not-burn product IQOS were a bit below consensus, and Philip Morris’s market share growth slowed. Yet he says investors are overlooking that inventory issues weighed on the shipments to the tune of about 8%. Excluding that, underlying IQOS volumes were up 28% year over year, picking up steam from the second quarter. In addition, the number of users also grew by more than a million; there has only been one other quarter when it reported higher user growth, he notes.
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 4th quarter 2020 earnings report in late January 2021