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Philip Morris Launches Cigarette Alternative iQOS in the UK

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Dec. 1 2016, Published 1:24 p.m. ET

Price movement

Philip Morris International (PM) has a market cap of $137.0 billion. It fell 2.6% to close at $88.28 per share on November 30, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.9%, -8.5%, and 3.6%, respectively, on the same day.

PM is trading 3.7% below its 20-day moving average, 6.9% below its 50-day moving average, and 8.6% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Value ETF (IWX) invests 2.0% of its holdings in Philip Morris. The YTD price movement of IWX was 10.6% on November 30.

The market caps of Philip Morris’s competitors are as follows:

  • Altria Group (MO) — $124.7 billion
  • Reynolds American (RAI) — $77.1 billion
  • Vector Group (VGR) — $2.7 billion

Latest news on PM

On November 30, 2016, Reuters reporter Martinne Geller noted, “Philip Morris International, the world’s largest international tobacco company, could eventually stop selling cigarettes, its chief executive told the BBC on Wednesday, as it launched its alternative product IQOS in the UK market.”

The report added, “The company’s IQOS smokeless cigarette which is already on sales in over a dozen markets including Japan, Switzerland, and Italy, heats tobacco enough to produce a vapour without burning it. The company believes that makes it much less harmful than cigarettes.”

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Performance of Philip Morris in 3Q16

Philip Morris (PM) reported 3Q16 net revenues of $19.9 billion, a rise of 2.6% over its 3Q15 net revenues of $19.4 billion. Excluding excise taxes, net revenues from the European Union and Asia rose 3.6% and 7.7%, respectively, between 3Q15 and 3Q16.

Philip Morris’s net revenues from the EEMA (Eastern Europe, the Middle East, and Africa) region and Latin America and Canada fell 4.0% and 11.7%, respectively, between 3Q15 and 3Q16. Its cigarette shipment volume in the EEMA region, Asia, and Latin America and Canada fell 5.4%, 9.0%, and 8.0%, respectively. Its cigarette shipment volume in the European Union rose 0.44%.

The company’s gross profit margin and operating margin fell 60 basis points and 30 basis points, respectively, between 3Q15 and 3Q16. Its net income fell to $1.938 billion in 3Q16 from $1.942 billion in 3Q15. It reported EPS (earnings per share) of $1.25 in 3Q15 and 3Q16 and adjusted EPS excluding currency of $1.29 in 3Q16, a rise of 4.0% over 3Q15.

PM’s cash and cash equivalents rose 42.9% between 4Q15 and 3Q16. The company reported free cash flow excluding currency of $3.0 billion in 3Q16, a rise of 22.7% over 3Q15.

EPS projection

For 2016, Philip Morris (PM) has projected EPS in the range of $4.53–$4.58 at current exchange rates, not including share repurchases. This projection also excludes the impact of any future acquisitions, future changes in currency exchange rates, unanticipated asset impairment and exit cost charges, and any unusual events.

Next, we’ll look at Delphi Automotive (DLPH).

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