Philip Morris Misses Q4 Profit Estimates, Concerns Analysts
Weak IQOS Shipments Disappoint Philip Morris in Q4
Philip Morris International failed to meet fourth quarter profit estimates and 2024 forecasts, causing concern among analysts. The main worry stemmed from slowing sales of its flagship heated tobacco product, IQOS.
Transition Toward Smoking Alternatives
The company has been at the forefront of a transition among tobacco giants towards smoking alternatives, with IQOS playing a pivotal role. Out of over $10 billion invested in its transformation since 2008, the majority has been channeled into IQOS.
Decline in Heated Tobacco Unit Shipments
Shipments of heated tobacco units saw a paltry growth of 6.1% in the fourth quarter, a notable drop from the 18% growth experienced in the third quarter. Furthermore, a ban on flavored heated tobacco in the European Union is expected to further dent shipments in the coming year.
Rising Importance of IQOS
Despite these setbacks, Chief Executive Jacek Olczak announced that IQOS has surpassed Marlboro in terms of net revenues. This underscores the significance of IQOS for Philip Morris’ business and its premium standing relative to peers.
Optimism Amid Concerns
While analysts expressed concern over the sustained slowdown in IQOS sales, Mark Giambrone, a portfolio manager at Barrow Hanley, remains optimistic. The impending test launch of IQOS in the United States, the world’s largest market for smoking alternatives, is anticipated to be a major positive catalyst for the company.
Stock Performance and Future Outlook
The company’s shares initially dropped 3% but made a partial recovery to stand around 1.6% lower. Philip Morris reported a fourth-quarter adjusted profit of $1.36 per share, falling short of analysts’ expectations. Furthermore, its projected adjusted annual profit is lower than market estimates.
Overall, Philip Morris faces challenges in sustaining the growth of its IQOS product, but its future prospects remain promising due to its foray into the U.S. market. The company must navigate the evolving regulatory landscape while capitalizing on new market opportunities to fuel its growth.
