Philip Morris: Why the Market Didn’t Like Q4 Results; We Disagree
Company Update (PM US) (Buy): The business continues to advance structurally, but non-operational headwinds mean there’s been little earnings growth. We believe this is changing.
(This post is for paid subscribers only, after the free articles on Altria and British American Tobacco last week. We had been publishing free on Substack since April 2023.)
Highlights
Q4 heated tobacco sales grew 13.9%; U.S. ZYN shipments grew 78.2%
But shares fell after results because earnings growth disappointed again
Headwinds are non-operational and temporary; EBIT growth is improving
Shares fallen 14% in the past year; 14.8x P/E, 5.8% Dividend Yield
At $89.12, we see an 100% total return (28.2% p.a.) by end of 2026
Introduction
Philip Morris (“PM”) released Q4 2023 results last Thursday (February 8); shares finished the day down 2.7% and was flattish the day after, which means the share price has now fallen 14% in the past year (partly offset by dividends):
PM Share Price (Last 1 Year)
Source: Google Finance (11-Feb-24).
We can easily fill an article with charts showing numbers in IQOS, ZYN, PM’s market share, etc., all continuing to point upwards, as PM delivered on these again. However, you can find the same charts already in company materials. Instead we will explain why some market participants may interpret PM’s financials negatively, and why we disagree.