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Factors You Must Watch Before Philip Morris (PM) Q2 Earnings

Philip Morris International Inc. PM is slated to release second-quarter 2020 results on Jul 21. This tobacco giant delivered an earnings surprise of 7.1% in the last reported quarter and has outperformed the consensus mark by 5.7%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for earnings in the second quarter has gone up by a penny to $1.09 per share over the past 30 days. However, this suggests a decline of 25.3% from the figure reported in the year-ago period. The consensus mark for revenues stands at $6,489 million, indicating a decline of 16.1% from the year-ago period’s reported figure.

Philip Morris International Inc. Price and EPS Surprise

Philip Morris International Inc. Price and EPS Surprise

Philip Morris International Inc. price-eps-surprise | Philip Morris International Inc. Quote

Key Factors to Note

In its first-quarter earnings call, management said that it expects the coronavirus to have detrimental impacts on its 2020 performance. In fact, the company expects the second quarter to bear the maximum impact of coronavirus this year. Phillip Morris was anyway expecting a soft second-quarter show due to tough year-over-year comparisons, certain costs and unfavorable dynamics in Indonesia. Management expects a further dismal performance due to the impacts of COVID-19.

The company expects hurdles related to lower duty-free sales on account of travel restrictions. Also, during the first-quarter earnings call, management said that it expects a decline in the rate of new IQOS user acquisition due to pandemic-led restrictions. Further, the delay in the enforcement of a minimum price in Indonesia is likely to have affected the business. In the second quarter, currency-neutral revenues are expected to have fallen 8-12% due to coronavirus-led hurdles, including reduced IQOS sales. Further, management expects earnings in the second quarter between $1 and $1.10 per share, including currency headwinds of about 12 cents per share. Earnings are expected to have been hurt by distributor and trade inventory movements, lower duty-free sales and delay in minimum price enforcement in Indonesia.

Nonetheless, the company’s overall efficient pricing strategy bodes well. Evidently, higher pricing at the combustible tobacco portfolio has been aiding the company’s performance for a while in the face of receding cigarette volumes due to stern government regulations and rising health consciousness.  

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Philip Morris this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Philip Morris currently has a Zacks Rank #3 and an Earnings ESP of -0.92%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Colgate-Palmolive CL has an Earnings ESP of +1.64% and a Zacks Rank #2.

Kellogg K has an Earnings ESP of +1.08% and a Zacks Rank #2.

Procter & Gamble PG has an Earnings ESP of +1.51% and a Zacks Rank #2.

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Philip Morris International Inc. (PM): Free Stock Analysis Report

ColgatePalmolive Company (CL): Free Stock Analysis Report

Kellogg Company (K): Free Stock Analysis Report

Procter Gamble Company The (PG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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