Philip Morris with growth after better 3Q24 results and raised outlook📊

Philip Morris (PM.US) reports better-than-expected results for 3Q24. Higher sales, combined with improved profitability, as well as a final raise in forecasts for the full year 2024, cause the company's stock price to rise more than 7% at the start of the session.

At the revenue level, Philip Morris reported $9.91 billion, beating the consensus forecast of $9.68 billion. The company thus achieved record quarterly revenues, as well as a record net profit, thanks to appropriate cost policies. 

Zyn sachets, which contain nicotine and are taken orally by being placed under the upper lip, recorded a 41% increase in sales in the US in the third quarter alone. Philip Morris added that demand for IQOS heated tobacco cartridges in markets such as Greece and Germany is also driving sales.

Philip Morris is seeking to increase sales of alternatives to cigarettes amid growing public awareness of the health effects of tobacco. Although these products contain fewer substances and chemicals linked to cancer and heart disease, their growing popularity is causing controversy, especially among young people who have never smoked before.

Zyn's growing popularity in the U.S. has caused supply problems, but those difficulties are now beginning to abate. The company announced in July that it would invest $600 million in a new manufacturing plant in the US to produce Zyn.

At the adj. EPS level, Philip Morris reported $1.91 (versus a forecast of $1.81). In y/y terms, this represents a 14.4% increase. Underlying such growth was primarily an improvement in net income, which increased to $3.08 billion in 3Q24. The higher growth rate of net income pushed net margin to record highs, thus maintaining the upward trend that has continued since 2Q23. The company reached values in the vicinity of 31%, which in the 2020-2022 period was the upper limits of the margin. The trend of improving net margin in the next quarters may thus be expected to slow down, and may instead consolidate at current levels. 

The company also raised its expectations for the full year 2024. It expects adjusted earnings per share to increase 15% this year (excluding changes in foreign exchange rates), up from previous forecasts of 13%, to $6.45-$6.51 (previously: $6.33-$6.45). The upper limit of earlier forecasts as the lower limit of current forecasts is a signal of Philip Morris' confidence in the strength of the current consumer trend regarding the growth in demand for the company's products. 

FINANCIAL RESULTS 3Q24:

• Cigarette shipment volume in units 163.24 billion
  • Europe cigarette shipment volume 43.74 billion units
  • South & Southeast Asia, Commonwealth of Independent States, Middle East, and Africa cigarette shipment volume 91.46 billion Units
  • East Asia, Australia & PMI Duty Free Cigarette Shipment Volume 12.81 billion Units
  • Americas cigarette shipment volume 15.24 billion Units
• Heated tobacco unit shipment volume 35.35 billion Units, estimate 35.19 billion
  • Europe heated tobacco shipment volume 14.20 billion Units
  • South & Southeast Asia, Commonwealth of Independent States, Middle East, and Africa heated tobacco shipment volume 7.13 billion Units
  • East Asia, Australia, and PMI duty-free heated tobacco shipment volume 13.86 billion Units
  • Americas heated tobacco shipment volume 157 million Units
• Adjusted operating income $4.15 billion, estimate $3.93 billion
• Adjusted EPS $1.91, estimate $1.81