Philip Morris International Inc. (NYSE: PM) reported first-quarter 2019 results before markets opened on Thursday. The tobacco products firm posted diluted earnings per share (EPS) of $0.87 on revenue of $6.75 billion. In the same period a year ago the company reported EPS of $1.00 on $6.9 billion in revenues. Reported revenue is net of excise taxes. Consensus estimates had called for EPS of $0.97 and revenue of $6.74 billion.
Excluding currency exchange effects, the company reported EPS of $0.90. Gross profit rose by just 0.1% to $4.29 billion, and operating income fell by 15.5% to $2.05 billion. Net income dropped 13% to $1.35 billion.
CEO André Calantzopoulos commented:
Our first-quarter results represent a promising start to the year, underpinned by a robust performance from our combustible portfolio and strong share growth from our smoke-free products, notably in Japan, Russia and across the EU. Indeed, we achieved an important milestone in the quarter, reaching more than 10 million IQOS users worldwide.
IQOS is the company’s acronym for I-Quit-Ordinary-Smoking and refers to branded products that heat but don’t burn tobacco. The U.S. Food and Drug Administration has not yet approved the products for sale in the United States, although Philip Morris sells them in 44 markets around the world.
Philip Morris is promoting its IQOS products heavily. Last week, in connection with Milan Design Week, the company splashed out for a sculpture exhibition by Alex Chinneck.
According to Frederic de Wilde, president of its European region, “Our aim is to create a smoke-free future; that is, a future where smoke-free products like IQOS replace cigarettes to the benefit of society.” During the first quarter, shipments of combustible tobacco products (the new name for cigarettes) were flat at 164.3 billion units. Sales of heated tobacco units rose 20.2% to 20.5 billion. Overall shipments rose by 1.1% year over year.
In its fiscal year 2019 outlook statement, Philip Morris forecast diluted EPS of at least $4.87, well below last year’s total of $5.08 and below the current consensus estimate of $5.09.
Investors didn’t seem to object to the light forecast and the EPS miss. Shares traded up about 0.6% in Thursday’s premarket, at $86.95 in a 52-week range of $64.67 to $94.26. The consensus price target is $91.35, and the stock’s dividend yield was 5.16% as of last night’s close.