Can Philip Morris’s Q3 2018 Earnings Boost Its Stock Price?



Stock performance

Philip Morris International (PM) is scheduled to announce its third-quarter earnings before the market opens on October 18. On October 12, the company was trading at $82.31, which represents a rise of 0.2% since the announcement of its second-quarter earnings on July 19.

In the second quarter, which ended on June 30, Philip Morris posted adjusted EPS of $1.41 on revenues of $7.73 billion. This beat analysts’ EPS expectation of $1.23 and a revenue estimate of $7.53 billion.

Despite outperforming analysts’ estimates in the second quarter, Philip Morris lowered its EPS guidance due to the downward revision of its sales forecast for heated tobacco unit shipments in Japan and unfavorable currency. The lowering of its guidance led to a fall in the company’s stock price.

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On September 12, FDA commissioner Scott Gottlieb announced that the agency is considering a policy change that would expel flavored e-cigarette products from the market. This pivot is due to the accelerating use of these products among young people. Gottlieb noted, “We didn’t predict what I now believe is an epidemic of e-cigarette use among teenagers.”

The announcement led to a rise in Philip Morris’s stock price as the growing popularity of e-cigarettes had a negative impact on cigarette sales. The US e-cigarette market has been dominated by JUUL. According to Wells Fargo analyst Bonnie Herzog, JUUL’s market share in the US e-cigarette market was 72.0% in mid-August.

Year-to-date stock performance

Year-to-date, Philip Morris’s stock price has declined by 22.1%. The increase in anti-tobacco regulations, a declining number of smokers, and rising competition in RRP (reduced-risk products) have pressured Philip Morris’s stock price.

During the same period, the stock prices of peers Altria Group (MO) and British American Tobacco (BTI) fell 15.9% and 35.4%, respectively. The stock price of the Consumer Staples Select Sector SPDR ETF (XLP) has fallen 7.9%.

Series outlook

With Philip Morris’s (PM) third-quarter earnings around the corner, we’ll look at analysts’ EPS and revenue expectations for the quarter. We’ll also cover its management’s guidance and analysts’ expectations for 2018. Finally, we’ll look at analysts’ recommendations and the company’s valuation multiple. In the next article, let’s look at analysts’ revenue expectations.


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