What To Expect From Philip Morris’ Q4?

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Philip Morris

Philip Morris (NYSE: PM) is scheduled to report its Q4 2022 results on Thursday, February 9. We expect PM stock to trade lower, with its revenue and earnings likely falling below the street expectations. Although the company should benefit from continued pricing growth, forex headwinds and continued supply chain pressure is likely to weigh on the overall revenue growth. Furthermore, our forecast indicates that PM stock is fully valued, as discussed below. Our interactive dashboard analysis of Philip Morris Earnings Preview has additional details.

(1) Revenues expected to be below the consensus estimates

  • Trefis estimates Philip Morris’ Q4 2022 revenues to be around $7.1 billion, reflecting a low double-digit y-o-y decline and below the $7.6 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 pricing growth, currency headwinds will likely weigh on its top-line growth.
  • Looking at Q3 2022, the company reported net revenue of $8.0 billion, marking a 1% fall over the prior-year quarter.
  • The company saw a 0.6% increase in total shipments, primarily heated tobacco units, up 17%, while cigarette volume was down 2% in Q3.
  • Our dashboard on Philip Morris Revenues has more details on the company’s segments.
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(2) EPS likely to be slightly below the consensus estimates

  • Philip Morris’ Q4 2022 adjusted earnings per share (EPS) is expected to be $1.22 per Trefis analysis, slightly below the consensus estimate of $1.24.
  • The company’s net income of $2.1 billion in Q3 2022 reflected a 14% drop from its $2.4 billion figure in the prior-year quarter due to higher operating expenses.
  • For the full-year 2023, we expect the adjusted EPS to be higher at $5.58 compared to an estimated $5.33 in 2022.

(3) PM stock looks fully valued

  • We estimate Philip Morris’ Valuation to be around $107 per share, which is just 3% above the current market price of $104.
  • At its current levels, PM stock is already trading at 19x forward EPS estimate of $5.58, compared to the last three-year average of 16x. We have already assigned a higher multiple for PM, given the robust growth expectations for its IQOS products.
  • Still, if the company reports upbeat Q4 results and provides the 2023 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 appropriately priced, 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.

Returns Feb 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 PM Return 0% 3% 14%
 S&P 500 Return 0% 6% 82%
 Trefis Multi-Strategy Portfolio 0% 12% 251%

[1] Month-to-date and year-to-date as of 2/1/2023
[2] Cumulative total returns since the end of 2016

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