Will Philip Morris Stock See Higher Levels Post Q3?

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Philip Morris

Philip Morris (NYSE: PM) is scheduled to report its Q3 2022 results on Thursday, October 20. We expect it to likely post revenue and earnings slightly above the street expectations. The company should benefit from continued volume and pricing growth. However, forex headwinds are likely to weigh on the overall revenue growth. Not only do we expect the company to navigate well over the latest quarter, our forecast indicates that PM stock is undervalued, as discussed below. Our interactive dashboard analysis of Philip Morris Earnings Preview has additional details.

(1) Revenues expected to be slightly above the consensus estimates

  • Trefis estimates Philip Morris’ Q3 2022 revenues to be around $7.6 billion, reflecting a mid-single-digit y-o-y decline and slightly above the $7.4 billion consensus estimate.
  • Philip Morris sells its tobacco products in non-U.S. markets. Revenue is generated from the sale of cigarettes and its flagship smokeless tobacco offering – IQOS.
  • While the company is expected to see continued volume/mix and pricing growth, currency headwinds will likely weigh on its top-line growth.
  • Looking at Q2 2022, the company reported net revenue of $7.8 billion, marking a 3% rise over the prior-year quarter.
  • Higher revenue was mainly driven by an increase in shipments. Cigarette and heated tobacco unit shipment volume was up by 1.1% – reflecting cigarette shipment volume growth of 1.0% and heated tobacco unit shipment volume growth of 1.9%.
  • Our dashboard on Philip Morris Revenues has more details on the company’s segments.
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(2) EPS likely to be slightly above the consensus estimates

  • Philip Morris’ Q3 2022 adjusted earnings per share (EPS) is expected to be $1.40 per Trefis analysis, slightly above the consensus estimate of $1.37.
  • The company’s net income of $2.3 billion in Q2 2022 reflected an 8% drop from its $2.5 billion figure in the prior-year quarter due to over 200 bps y-o-y decline in operating margin to 39%.
  • For the full-year 2022, we expect the adjusted EPS to be lower at $5.71 compared to the EPS of $6.08 in 2021.

(3) PM stock looks undervalued

  • We estimate Philip Morris’ Valuation to be around $111 per share, which is 29% above the current market price of $86, implying that investors are likely to be better off buying PM stock for better gains in the long run.
  • At its current levels, PM stock is already trading at a 15x forward EPS estimate of $5.71, compared to the last three-year average of 16x. We have assigned an even higher multiple for PM, given the robust growth expectations for its IQOS products.
  • If the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for PM stock.

While PM stock looks undervalued, it is helpful to see how Philip Morris’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Philip Morris vs. Entergy.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

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