Shares of Philip Morris International (PM 1.73%) were moving higher today after the international tobacco giant posted strong results in its first-quarter earnings report, driven by growth in its IQOS heated tobacco sticks.
The stock closed up 3.8% on the news.
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IQOS is heating up Philip Morris' stock
Philip Morris continued to make progress toward smoke-free products making a majority of its revenue as they represented 39% of revenue in the first quarter. IQOS, its heated tobacco stick product leading its transition to its smoke-free future, reported better than 10% market share in Europe for the first time, and IQOS's market share gained more than 3 percentage points of share in Japan to reach 29%.
The company reported 20.9% in heated tobacco unit shipment volume to 33.1 billion, while cigarettes were down just 0.4% to 143.2 billion. Total shipment volume, including oral products, was up 3.6% to 180.5 billion, a bullish sign for future growth.
Overall revenue jumped 9.7% to $8.8 billion, with organic revenue, which excludes divestitures, acquisitions, and currency exchange, up 11%. That result beat analyst estimates at $8.47 billion.
Further down the income statement, gross margin improved thanks to price hikes and a higher-margin profile of smoke-free products. Adjusted earnings per share jumped 8.7% to $1.50, which topped expectations at $1.41. In constant currency, adjusted earnings per share (EPS) was up 23% to $1.70.
CEO Jacek Olczak said, "Strong smoke-free momentum continues with rapid underlying volume progression and accelerating organic net revenue and gross profit growth."
NYSE: PM
Key Data Points
What's next for Philip Morris
Looking ahead, management continued to expect strong growth in the heated tobacco category, forecasting 14%-16% growth and overall organic revenue growth of 7%-8.5%. On the bottom line, the company called for adjusted EPS of $6.55-$6.67, excluding currency, up 9%-11% and ahead of the consensus at $6.37.
The results should give investors confidence that its IQOS strategy is paying off. Philip Morris stock continues to look like a good value, especially when factoring in its 5.5% dividend yield.
