Philip Morris International Inc. Third Quarter Report

Philip Morris International Inc. (NYSE: PM) showcased a robust performance in its third-quarter earnings call on October 25, 2024. CFO Emmanuel Babeau emphasized significant organic revenue growth and a strong year-on-year increase in adjusted diluted earnings per share (EPS).

The company’s success stemmed from solid sales of its smoke-free products, IQOS and ZYN, in addition to growth in the combustibles segment. Philip Morris has raised its full-year outlook due to effective cost management and the promising performance of its smoke-free products.

Key Takeaways

• 11.6% organic revenue growth and 18.0% currency-neutral increase in adjusted diluted EPS.
• IQOS volumes grew by 15% year-on-year, particularly in Japan and Europe.
• ZYN shipments in the U.S. saw over 40% growth, with a target production capacity of 900 million cans by 2025.
• The company raised its guidance, expecting 2%-3% volume growth, 9.5% organic net revenue growth, and 14%-15% adjusted diluted EPS growth.
• Sustainability initiatives are progressing, aiming for carbon neutrality in manufacturing by 2025.

Company Outlook

• Continued robust growth is expected for Q4, with dividends raised for the 17th consecutive year.
• The company targets over 50% market share in low and middle-income countries for smoke-free alternatives.

Challenges and Highlights

Bearish Factors

• Concerns over shipment mix and potential supply constraints affecting future performance.
• Full inventory replenishment for ZYN expected to extend into 2025 despite attempts to restore supply levels by Q4 2023.

Bullish Factors

• Improvement in ZYN market share noted in Q3.
• Positive volume trends observed in international cigarette markets attributed to reduced smuggling in certain regions.

Misses

• A proposed settlement for Canadian litigation could result in a significant financial impact, estimated at $23.5 billion.
• The vaping market is not accelerating significantly due to ongoing regulatory challenges.

Q&A Highlights

• CFO Emmanuel Babeau discussed minor adjustments in deleveraging guidance due to euro strength.
• It's too early to determine if Canadian litigation settlement payments would be tax-deductible.

In conclusion, Philip Morris International Inc. demonstrated strong third-quarter results driven by IQOS and ZYN. The company's strategic focus on smoke-free products, cost efficiency, and market expansion led to an optimistic outlook for the year, despite potential financial impacts from litigation and vaping market challenges. The commitment to sustainability and responsible marketing continues as they address youth nicotine use concerns.

InvestingPro Insights: Philip Morris’s robust performance is highlighted by effective cost management and market confidence, complemented by a strong dividend history and impressive returns over the last year. Additionally, high P/E ratios suggest significant growth expectations may be priced in.

Transcript

Operator: Good day and thank you for standing by. Welcome to Philip Morris International Inc., 2024 Third Quarter Results Conference Call. All participants are in listen-only mode. ***

Emmanuel Babeau: Thank you, James, and welcome everyone. After an excellent first half, we delivered another outstanding performance in Q3, with organic revenue growth driven primarily by smoke-free product sales. ***

Philip Morris International Inc. (PM) reported strong third-quarter earnings, driven by sales of smoke-free products like IQOS and ZYN.