Philip Morris's stock pulls back premarket as profit beats expectations but outlook misses

By Tomi Kilgore

Jumps in heated-tobacco unit and nicotine pouch shipments offset declines in cigarette sales

Shares of Philip Morris International Inc. pulled back Tuesday, after the seller of cigarettes and heated tobacco units beat first-quarter profit expectations but provided a downbeat second-quarter outlook.

The stock (PM) fell 1% in premarket trading. The stock had rallied 6.2% amid a five-day win streak through Monday, after closing at a six-month low on April 15.

Net income rose to $2.15 billion, or $1.38 a share, from $2 billion, or $1.28 a share, in the same period a year ago.

Excluding nonrecurring items, such as asset impairment costs and fair value adjustments of equity investments, adjusted earnings per share rose to $1.50 from $1.38 to beat the FactSet consensus of $1.41.

Net revenue grew 9.7% to $8.79 billion, above the FactSet consensus of $8.44 billion.

Gross margin improved to 63.7% from 62.1%, as the cost of sales fell 5.2% to $3.2 billion.

The company's smoke-free business accounted for 39% of total revenue, in line with the previous quarter.

Cigarette shipments fell 5.3% to 37.09 billion units, while heated tobacco units increased 12.3% to 11.34 billion units and nicotine pouches jumped 55.9% to 12.3 million cans.

Oral smoke-free products, which includes snuff, snuff leaf and U.S. chew, saw shipment volume increase 40%.

"Strong smoke-free momentum continues with rapid underlying volume progression and accelerating organic net revenue and gross profit growth, fueled by the operating leverage of IQOS and the best-in-class economics of ZYN," said Chief Executive Jacek Olczak.

Looking ahead, the company expects second-quarter adjusted EPS of $1.50 to $1.55, below the FactSet consensus of $1.62, and projects full-year adjusted EPS of $6.19 to $6.31 - below expectations of $6.35.

The stock has slipped less than 0.1% year to date through Monday, while the S&P 500 has gained 5.1%.

-Tomi Kilgore

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04-23-24 0825ET

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