What's in the Offing for Philip Morris (PM) in Q1 Earnings?

Philip Morris International Inc. PM is likely to witness a year-over-year decrease in the top and bottom lines when it reports first-quarter 2022 earnings on May 21. The Zacks Consensus Estimate for revenues is pegged at $7,281 million, suggesting a fall of nearly 4% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has declined by a penny over the past seven days to $1.48 per share. This indicates a decline of 5.7% from the figure reported in the prior-year period. Philip Morris has a trailing four-quarter earnings surprise of 5.1%, on average. This tobacco giant delivered an earnings surprise of 3.9% in the last reported quarter.

Philip Morris International Inc. Price, Consensus and EPS Surprise

Philip Morris International Inc. price-consensus-eps-surprise-chart | Philip Morris International Inc. Quote

Key Factors to Consider

On its fourth-quarter 2021earnings call management highlighted that it expects continued uncertainty concerning the recovery pace from the pandemic-led operating landscape in 2022. Management then stated that it expects continued gradual recovery in the duty-free business outside Asia and no meaningful recovery in Asia.

Moving on, cigarette volumes, in general, have been affected by consumers’ rising health consciousness and a shift to low-risk tobacco alternatives. In 2022, the total international industry volume is estimated to decline by nearly 1-2%, excluding China and the United States. On its fourth-quarterearnings call PM stated that it expects the total cigarette and heated tobacco unit shipment volume growth to come between a decline of 1% and an increase of 1%. These factors raise concerns for the upcoming quarterly performance.

However, the company’s focus on reduced risk products or RRPs has been a driver, with consumers’ increased inclination toward this category. Philip Morris is progressing well with its business transformation, with smoke-free products generating more than 30% of the company’s net revenues in the fourth quarter of 2021. However, IQOS is currently not available for sale in the United States due to an importation ban and a cease-and-desist order by the U.S. International Trade Commission. While Philip Morris has contingency plans under action (such as domestic production), it expects to be able to restart the supply in the United States in the first half of 2023.

Among other initiatives, Philip Morris announced a partnership with South Korea’s KT&G in January 2020 to commercialize the latter’s smoke-free products outside the country. In February 2021, the company revealed plans of generating at least $1 billion in annual net revenues from "Beyond Nicotine" products by 2025. As part of the strategy, the company made three meaningful buyouts in the third quarter of 2021, including Vectura Group plc, Fertin Pharma A/S and OtiTopic.

Philip Morris has been benefiting from its strong pricing power. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases due to the addictive quality of cigarettes. This trend bodes well for the company for the quarter under review.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for PM this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Philip Morris currently has a Zacks Rank #4 (Sell) and an Earnings ESP of -0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in the to-be-reported quarter.

The Hershey Company HSY has an Earnings ESP of +1.84% and a Zacks Rank #2. It is anticipated to register a top and bottom-line increase when it reports first-quarter 2022 results. The Zacks Consensus Estimate for Hershey’s revenues is pegged at $2,482 million, indicating growth of 8.1% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Hershey’s quarterly earnings is pegged at $2.10 per share, suggesting a rise of 9.4% from the year-ago quarter’s reported figure. HSY delivered an earnings beat of 4.3%, on average, in the trailing four quarters.

Church & Dwight Co., Inc. CHD has an Earnings ESP of +2.69% and a Zacks Rank #3. The company is expected to register top-line growth when it reports first-quarter 2022 results. The consensus mark for Church & Dwight’s revenues is pegged at $1,287 billion, indicating an increase of 3.6% from the year-ago quarter.

The Zacks Consensus Estimate for Church & Dwight’s quarterly earnings per share of 76 cents suggests a decline of 8.4% from the year-ago quarter’s reported figure. CHD has a trailing four-quarter earnings surprise of 8.8%, on average.

Kellogg Company K has an Earnings ESP of +2.62% and a Zacks Rank #3. The company is expected to register a top and bottom-line decline when it reports first-quarter 2022 results. The consensus mark for Kellogg’s revenues is pegged at $3,564 million, indicating a drop of 0.6% from the year-ago quarter.

The Zacks Consensus Estimate for Kellogg’s bottom line stands at 91 cents per share, which suggests a decline of approximately 18% from the year-ago period’s reported figure. K has a trailing four-quarter earnings surprise of 11.8%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.