Philip Morris is set to report its Q2 2024 results, with expectations of slightly lower revenue and earnings compared to consensus estimates. The company is projected to achieve $9.1 billion in sales and $1.55 in adjusted earnings per share, falling short of street expectations of $9.2 billion and $1.57, respectively. The growth in revenue is anticipated to be driven by an increase in heated tobacco units (HTU), although currency fluctuations may impact overall bottom-line growth.
PM stock has seen a 25% increase from early 2021 to around $105 currently, lagging behind the 45% growth of the S&P 500 during the same period. Returns for PM stock have been inconsistent, with gains of 15% in 2021, 7% in 2022, and a decline of 7% in 2023, underperforming the S&P 500 in two out of the three years. It has been challenging for individual stocks, including heavyweights in the Consumer Staples sector and megacap stars, to consistently outperform the S&P 500 in recent years.
Despite the uncertain macroeconomic environment with high oil prices and elevated interest rates, PM may face challenges in outperforming the S&P 500 over the next 12 months. From a valuation perspective, PM stock appears to have limited potential for growth, with an estimated valuation of $107 per share based on a 17x P/E multiple. Looking back at the previous quarter, PM saw revenue increase by 10% year-on-year in Q1, driven by growth in HTU shipment volume and oral products volume.
In the latest quarter, Philip Morris is expected to benefit from the continued success of its IQOS products, which have outperformed the iconic Marlboro brand in terms of revenue. Global demand for IQOS helped offset the impact of an EU ban on flavored heated tobacco products in the previous quarter. Despite a potential decrease in cigarette volume due to inflation, higher pricing for combustible products may aid overall sales growth. The company has adjusted its earnings outlook for 2024 to be between $6.19 and $6.31 per share, down from previous guidance.
Overall, it is predicted that Philip Morris will fall slightly short of Q2 expectations, with its stock already trading at 17x forward expected earnings suggesting limited room for growth. While there may be some potential for growth, it is important to consider how Philip Morris compares to its peers in the industry. Peer comparisons can provide valuable insights into the company’s performance relative to others in the market.
