Philip Morris International

  • Philip Morris International (PMI) reported robust Q3   2021 results on Tuesday with both earnings and revenues topping analysts’   estimates.

  • Net revenues   increased by 9% to $8.1 billion in Q3 and was above consensus estimates of   $7.9 billion. Net revenues, on a constant currency basis, increased by 7.6%.   The growth in the top line was again largely driven by continued strong   growth in heated tobacco or IQOS shipment volumes. Net revenues from these   smoke-free products accounted for 29% of total net revenues. Adjusted   operating profit rose 7.4% to $3.2 billion. The adjusted operating margin   contracted by 10 basis points to 43.5%.

  • Adjusted   diluted EPS rose to a record $1.58 which was marginally above consensus. PMI   increased its regular quarterly dividend by 4.2% to an annualized rate of   $5.00 per common share. The company also repurchased 0.9 million shares of   its common stock for $94 million.

  • On a   regional basis, the European Union area reported robust results with revenue   increasing by 8.2% to $3.2 billion. Performance was also boosted by a   recovery in the Middle East & Africa which increased sales by 23% to $900   million. The revenue growth in these regions was offset by 0.6% decline in   the South & South-East Asian region ($1.1 billion).

  • The current share price of Philip Morris International places the share on an annual dividend yield of approximately 5%. Looking ahead, the company's mature cigarette business continues to generate significant amounts of cash that that will help maintain the company’s large dividend pay-out ratio. Earnings growth should however be boosted by the heated reduced-risk tobacco products, which grew by 28% year-on-year in Q3. As of Q3 these products accounted for 29% of Philip Morris revenues, with the company targeting 50% of revenues by 2025. Management expects net revenue to grow up to 7% in 2021 and adjusted EPS growth of up to 11% to $5.75. This healthy yield coupled with an expectation of further growth over the foreseeable future should make for attractive returns for shareholders. PMI is held in both Cratos Global Managed Portfolios as well as the Cratos BCI Worldwide Flexible Fund.

Philip Morris International