Philip Morris: Strong Q3 Growth Despite Temporary Chip Shortage

(Preview) Company Update (PM US) (Buy)

Summary

• PM's Q3 2021 results today contained little surprise as management had already reiterated the full-year outlook in September.

• Q3 results were strong, with EPS growing 11.6% year-on-year; full-year outlook now implies organic EPS growth of 13-14%.

• Overall volume trends were up 0.6% excluding inventory, with Heated Tobacco Unit sales being a material positive in several regions.

• The global chip shortage contributed to a slowdown in IQOS user growth in Q3, but consumable volume still grew in Japan and the E.U.

• With Philip Morris' stock at $97.43, we expect a total return of 45% (13.3% annualized) in just over 3 years. The Dividend Yield is 5.1%. Buy.

Introduction

We review our Philip Morris investment case after Q3 2021 results were released this morning (October 19). At the time of writing (13:00 EST), PM stock is down 0.7%.

We initiated our Buy rating on PM in June 2019. Since then, shares have returned 39.2% (with dividends), including 23.5% year-to-date.

Q3 results contained little s…