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is rising on Tuesday—in contrast to U.S.-focused peer
—following the tobacco giant’s better-than-expected first-quarter results. Its chief financial officer says that the report is more proof that the company is on track to meet its smokeless targets.
Philip Morris (ticker: PM) said it earned of $2.42 billion, or $1.55 a share, compared with earnings per share of $1.17 a share in the year-ago period. On an adjusted basis, which excludes nonrecurring items like currency impacts, asset impairments, and exit costs, earnings were $1.57 a share. Revenue climbed 6%, to $7.59 billion. Analysts were looking for EPS of $1.40 a share on revenue of $7.27 billion.
The company said that market share for its heat-not-burn device IQOS, excluding the U.S., is up 1.7 points to 7.6%. Sales of smoke-free products accounted for 28% of total revenue in the quarter. While shipments of traditional cigarettes were down 7.3%, heated-tobacco unit shipment volumes jumped nearly 39%, to 21.7 billion units.
CFO Emmanuel Babeau spoke with Barron’s following the results, saying that “underlying trends are incredibly strong.” Adjusted EPS were at an all-time high in the quarter, and while investors can still expect some volatility from the Covid-19 pandemic and investments the company is making, overall, he says, the report is another step on the company’s “ambitious journey…to put an end to combustible cigarettes.”
The report is the first since the company’s analyst day in February, and he calls it a “nice illustration” of the continuing trends it anticipated. The company hopes to be a predominantly smoke-free company by revenue by 2025, “and when your name is Philip Morris, it’s quite a tribute to what we intend to do,” Babeau says. He notes that the company’s portfolio of these products are closing in on nearly 30% of total sales, up from less than 22% a year ago, notching “remarkable growth.”
As for reports that the U.S. government may plan to require a reduction in nicotine levels in cigarettes, which is weighing on Altria (MO) today, Babeau highlights that these plans haven’t been confirmed by the White House. He says that Philip Morris is a strong supporter of the Food and Drug Administration’s target of reducing combustible cigarette consumption, and that the goal dovetails with the company’s own—to move people to reduced-risk products. The agency approved the marketing of IQOS as a modified-risk tobacco product last summer.
He also warns that reducing nicotine too drastically and too quickly could have unintended side effects, including bolstering the illicit trade of cigarettes or people smoking a higher number of cigarettes to achieve the same nicotine content.
Philip Morris stock is up 2.8%, at $94.27, in recent trading, while Altria is down 3.4%, at $47.40, and the
is down 0.8%. Philip Morris shares have gained 14% year to date and are up 30% in the past year.
Write to Teresa Rivas at teresa.rivas@barrons.com
