DJ Philip Morris Climbs on Earnings. CFO Cites Transformation. -- Barrons.com
Philip Morris International reported better-than-expected fourth-quarter earnings, sending the stock higher even as cigarette sales continue to fall. Chief Financial Officer Emmanuel Babeau told Barron's it was a "good landing after an exceptional year."
The company (ticker: PM) said it earned $1.98 billion, or $1.27 a share, up from $1.04 a share in the year-ago period. Adjusted earnings, which exclude asset impairments and costs related to the deconsolidation of its Canadian business, among other items, were $1.26 a share. Revenue fell 3.5% to $7.44 billion. Analysts were looking for EPS of $1.21 a share and revenue of $7.41 billion.
While shipment volumes of traditional combustible products, such as cigarettes, slipped 12% in the quarter, volume rose 27% for iQOS, the company's heated-tobacco cigarette alternative.
For the first quarter, Philip Morris expects EPS of around $1.40, compared with the $1.31 consensus estimate on Wall Street. For the full year, the company expects to earn between $5.90 and $6 a share, or $5.65 to $5.75, excluding the effect of positive moves in foreign exchanges, up from $5.17 last year. Before the news, the consensus call on Wall Street was for EPS of $5.87.
Babeau spoke with Barron's following a conference call held to discuss the results. The strong performance in the quarter in the current environment "was not a walk in the park," he said. "It's a great achievement and a testament to the quality of the business today."
He noted the continuing strength of iQOS, the most recent version of which the Food and Drug Administration confirmed in December as "appropriate for the protection of public health," when authorizing it for sale. Philip Morris moved 76.1 billion consumable sticks in the quarter, which Babeau says demonstrates both the benefit that consumers are finding in using the product and the company's ability to quickly and efficiently improve it.
Part of that ability comes from Philip Morris's ongoing embrace of digital solutions. While tobacco and technology may not seem like an obvious mix, the company has been utilizing the latter to a greater extent with iQOS. Not only is the device itself "at the forefront of technology," Babeau explains, but technology allows it to verify the age of its customers, to avoid unauthorized users, and gain access to data.
That information lets the company know who "iQOS users are, and what they love ...we are able to talk to them [and] build a commercial relationship that's incredibly strong," he said.
That speaks to the company's continuing shift toward a more consumer-centric model, a break from the business-to-business sales long predominant in the tobacco industry. Babeau calls it a win for both the company and consumers, as connected tobacco products allow Philip Morris to develop iQOS in a way that meets users' needs.
Ultimately, he says that Philip Morris is "transforming itself rapidly and deeply to be a very different company," a transition it will discuss further at its coming investor day.
Philip Morris is up 3.3% to $82.85 in afternoon trading.
Write to Teresa Rivas at email@example.com
(END) Dow Jones Newswires
February 04, 2021 14:32 ET (19:32 GMT)
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