Philip Morris International Inc. PM is treading with an impressive pace on its smoke-free journey. The tobacco giant recently submitted Premarket Tobacco Product Applications (PMTAs) and Modified Risk Tobacco Product Applications (MRTPAs) with the U.S. Food and Drug Administration (“FDA”) for its revolutionary IQOS ILUMA heated tobacco products. Additionally, the company is pursuing authorization to promote IQOS ILUMA products as modified risk products that lower the level of exposure to harmful and potentially hazardous substances. This claim was previously granted for prior versions of IQOS. It is mandatory to secure a PMTA marketing authorization to commercialize any new tobacco product in the United States.
Consumers growing inclination toward low-risk, reduced-risk products (RRPs) has kept Philip Morris on its toes to expand in this arena. PM is progressing well with its business transformation, with smoke-free products generating 36.2% of the company’s net revenues in the third quarter of 2023. Philip Morris is well-placed to become a majority smoke-free company by 2025. Cigarette Filter Alternative
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The company’s IQOS, a heat-not-burn device, counts among one of the leading RRPs in the industry. These next-generation devices are backed by substantial scientific insights and research. The company expects such advanced and high-quality products to aid adult smokers in switching from traditional cigarettes to smoke-free options. IQOS ILUMA is PM’s most innovative heated tobacco product. In the third quarter of 2023, revenues from smoke-free products (excluding Wellness and Healthcare) jumped 35.7% to $3,234 million (up 16.2% organically). Total IQOS users at the end of the third quarter were estimated at roughly 27.4 million (including nearly 19.7 million who switched to IQOS and stopped smoking). Revenues from the Wellness and Healthcare unit grew 26.3% year over year on an organic basis to $75 million. Management stated that increased net revenues of smoking cessation products and certain inhalation products led to the upside.
Philip Morris posted solid third-quarter 2023 results, wherein the top and bottom lines increased year over year, and the bottom line beat the Zacks Consensus Estimate. The company continued to benefit from pricing power and strength in IQOS and ZYN. While cigarette shipment volumes dropped 0.5% to 161.1 billion units in the quarter, HTU shipment volumes of 32.5 billion units rose 18% year over year. Encouragingly, management raised its growth guidance for full-year adjusted EPS. For the full year 2023, PM expects adjusted EPS in the band of $6.05-$6.08 compared with the $5.98 reported in 2022. Excluding currency movements, the adjusted EPS is envisioned in the band of $6.58-$6.61, suggesting 10-10.5% growth from the year-ago period figure. Earlier, PM expected adjusted EPS in the band of $6.13-$6.22. Excluding currency movements, the adjusted EPS was envisioned in the band of $6.46-$6.55, suggesting 8-9.5% growth from the year-ago period figure. Philip Morris has dedicated more than $10.5 billion to the scientific research, development and commercialization of smoke-free products since 2008. The company remains focused on offering smoking adults alternative options, which can help lower health risks compared to traditional smoking. Although shares of this Zacks Rank #3 (Hold) company have dropped 5.7% in the past three months, it has outpaced the industry’s decline of 6.7%.
Lamb Weston LW, which offers frozen potato products, currently sports a Zacks Rank #1 (Strong Buy). LW delivered an earnings surprise of 46.2% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers. The J. M. Smucker Company SJM, a branded food and beverage product company, currently carries a Zacks Rank #2 (Buy). SJM has a trailing four-quarter earnings surprise of 7.3%, on average. The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the corresponding year-ago reported figure. Post Holdings POST, a consumer-packaged goods holding company, currently carries a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 59.6%, on average. The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales suggests growth of 13.2% from the corresponding year-ago reported figure.
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