Philip Morris Hits Record High on Q3 Earnings Beat: ETFs in Focus

Barchart · 10/25 15:06

The year 2024 is turning out to be strong for Philip Morris International PM. The tobacco giant surged about 44% from mid-April to early September, rebounding from a downturn earlier in the year.

Philip Morris International (PM) posted robust third-quarter 2024 results on Oct. 22, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. The cigarette maker was experiencing a downtrend, declining approximately 6.7% from early September before rebounding with a surge of around 10% following the earnings announcement.

Q3 Performance in Detail

The tobacco company reported adjusted earnings per share (EPS) of $1.91, which jumped 14.4% from the year-ago quarter. Markedly, the bottom line beat the Zacks Consensus Estimate of $1.83 by 4.37%. Excluding currency movements, adjusted EPS for the quarter increased 18% year over year to $1.97.

Net revenues of $9.9 billion saw an increase of 11.6% on an organic basis from the same quarter last year, driven by robust pricing and rising demand for smoke-free products. The Zacks Consensus Estimate for the top line was pegged at $9.57 billion, reflecting a positive surprise of 3.55%.

Operating income for the quarter reached $3.7 billion, marking an increase of 13.8% from the year-ago quarter on an organic basis.

Total cigarette and HTU shipment volumes increased by 2.6% to about 198.6 billion units in the quarter, driven by an 8.9% increase in HTU shipments across all regions. PMI’s Total Oral SFP shipment volume increased 24.7% from the year-ago quarter, boosted by a 43.6% increase in shipment volumes for PMI’s Nicotine Pouches.

PM’s Quest for a Smoke-Free Future

The smoke-free business (SFB) of the world’s largest tobacco company accounted for about 38% of its total net revenues, highlighting Philip Morris’ goal of transforming into a smoke-free enterprise. Continuing with its robust momentum, SFB’s top line witnessed organic growth of 16.8% year over year, with a 20.2% organic increase in its gross profits.

According to Reuters, higher prices and robust demand for PMI’s smoke-free alternatives fueled the rise in the tobacco giant’s profit forecast and robust third quarter. Philip Morris has invested billions in developing cigarette substitutes as health-conscious consumers shift toward alternatives like its IQOS heated tobacco device and ZYN nicotine pouches, which have become a key focus for investors.

Guidance

For 2024, PM expects adjusted EPS in the band of $6.45-$6.51, highlighting growth of 7.3-8.3% from the year-ago figures. The company had reported EPS of $6.01 in 2023. Excluding currency movements, adjusted EPS is envisioned in the band of $6.85-$6.91, suggesting 14-15% growth from the year-ago reported figure.

For 2024, PM expects net revenues to increase in the band of 9.5% on an organic basis, along with organic growth of 14-14.5% in its operating income. The tobacco giant forecasts an acceleration in its organic smoke-free net revenues and gross profit growth from 2023.

ETF Impact

Here, we have highlighted some ETFs with significant exposure to Philip Morris.

iShares U.S. Consumer Staples ETF (IYK)

iShares U.S. Consumer Staples ETF has 8.39% exposure in PM. The fund has gained 0.14% over the past month and 16.44% over the past year. IYK charges an annual fee of 0.40%.

First Trust Morningstar Dividend Leaders Index Fund (FDL)

First Trust Morningstar Dividend Leaders Index Fund has an exposure of 5.98% in PM. The fund has gained 1.74% over the past month and 31.27% over the past year. FDL charges an annual fee 0.45%.

Invesco S&P Ultra Dividend Revenue ETF (RDIV)

Invesco S&P Ultra Dividend Revenue ETF has an exposure of 5.57% in PM. The fund has gained 0.67% over the past month and 39.68% over the past year. RDIV has an expense ratio of 0.39%.

Amplify AI Powered Equity ETF (AIEQ)

Amplify AI Powered Equity ETF has 5.79% weight in PM. The fund has gained 1.94% over the past month and 27.03% over the past year. AIEQ charges an annual fee of 0.75%.

Cambria Cannabis ETF (TOKE)

Cambria Cannabis ETF has an exposure of 4.81% in PM. The fund has gained 4.64% over the past month and 8.73% over the past year. TOKE charges an annual fee of 0.42%.

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Philip Morris International Inc. (PM): Free Stock Analysis Report
 
First Trust Morningstar Dividend Leaders ETF (FDL): ETF Research Reports
 
iShares U.S. Consumer Staples ETF (IYK): ETF Research Reports
 
Invesco S&P Ultra Dividend Revenue ETF (RDIV): ETF Research Reports
 
Amplify AI Powered Equity ETF (AIEQ): ETF Research Reports

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