Why Has Philip Morris’ Price Risen ~17% This Year Despite An Earnings Miss?

+17.20%
Upside
92.23
Market
108
Trefis
PM: Philip Morris logo
PM
Philip Morris

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Philip Morris’ Q1 2016 earnings missed consensus estimates. Despite this, the stock price has risen almost 17% this year.

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However, a negative currency impact played a huge role in the declining top line and bottom line. If such impact is excluded, the company reported positive growth in revenue and EPS.

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The company also raised its full-year guidance by $0.15, which would represent a 10%-12% annual growth, a notable improvement from the 7% decline in 2015.

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The prospects of iQOS, its reduced risk HeatStick product, also look bright and should foster growth in the future. Since its September launch in Japan, iQOS has grabbed 3.4% of the market share in Tokyo, and 2.4% in the overall expansion area there, with a conversion rate of over 50%. Besides Japan, iQOS has also been launched in key cities of Italy and Switzerland, and city launches have also been commenced in Bucharest, Lisbon, and Moscow. The company expects iQOS to be present in key cities in around 20 markets by the end of 2016.

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In Switzerland, the product is currently present in six key cities. The HeatStick offtake share (select C-store sales volumes as a percent of total sales volume for cigarettes and HeatSticks) was 0.8% in the launch area, the highest level since its August launch. With a 1.9% market share, the HeatStick offtake share was even higher in the French-speaking part of the launch area, where the majority of the support is concentrated. Philip Morris aims to achieve a target of 3% to 5%, representing 30 to 50 billion units. The product also has a potential of additional Operating Companies Income (OCI) of $720 million to $1.2 billion per year.

Have more questions on Philip Morris? See the links below:

Relevant Articles
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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Philip Morris International.
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