Shares of tobacco giant Philip Morris International Inc. (NYSE: PM) continued to show positive momentum on Wednesday, with the stock gaining 6% over the past month. Investors eagerly await the company's second quarter 2023 earnings report, which is scheduled to be released on Thursday, July 20, before the market opens.
Revenue Expectations
Analysts are projecting that Philip Morris will report revenue of $8.6 billion for the second quarter of 2023. This estimate suggests a growth of 10% compared to the same period last year. In the first quarter of this year, the company's revenue saw a 3.5% year-over-year increase, reaching $8 billion.
Earnings Forecast
Philip Morris has provided guidance for adjusted earnings per share (EPS) ranging from $1.42 to $1.47 for the second quarter of 2023. Analysts, on the other hand, estimate EPS of $1.47, which is higher than the $1.32 reported in the same quarter last year. The first quarter of 2023 saw a 4.4% decrease in adjusted EPS, amounting to $1.38.
Strength in IQOS
Philip Morris is expected to benefit from the continued strength of its IQOS product, which has been gaining market share across various regions and showing a rise in adoption. The company noted in its first quarter report that as of March 31, there were approximately 25.8 million IQOS users. Furthermore, with the introduction of the IQOS ILUMA, the product category has experienced further growth, attracting an estimated 10 million users. ILUMA has dominated market volumes in countries like Japan, Switzerland, and Spain, accounting for over 85% of HTU (heated tobacco unit) volumes. Alongside promising growth in developed countries, PMI is witnessing encouraging expansion for IQOS in low and middle-income markets.
Growth of ZYN
Philip Morris will also benefit from the growth of nicotine pouch brand ZYN, which it acquired through the Swedish Match acquisition. In the first quarter, ZYN witnessed a 47% increase in volume in the US. The company sees significant potential to expand distribution and velocity, referring to the number of ZYN cans sold per store per week.
Margin Challenges
In the first quarter, Philip Morris faced challenges with its margins due to inflationary pressures and supply chain obstacles. These pressures are expected to persist through the year, impacting the company's margins. Despite this, Philip Morris continues to make growth investments to support its business expansion.
Investors are eager to see the financial results of Philip Morris International Inc. as the company prepares to release its second quarter 2023 earnings report. With expectations of revenue growth and increased earnings per share, fueled by the robust performance of IQOS and the potential of ZYN, Philip Morris appears to be well-positioned to meet market expectations. However, challenges with margins and inflationary pressures remain an ongoing concern.
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