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Philip Morris International Inc. (NYSE: PM ) fell slightly on Friday, a day after the company reported fourth-quarter 2022 earnings results. The top and bottom line numbers beat estimates and the company expects to see earnings growth next year. With the achievement of two important milestones in the form of the IQOS approval and the acquisition of Swedish Match, PMI believes it is well positioned to accelerate its smoke-free transformation in the coming year.
Quarterly performance
In the fourth quarter of 2022, Philip Morris generated a profit of $8.15 billion, which was relatively flat compared to last year on a reported basis. On an adjusted basis, revenue increased 7.5%, helped by higher tobacco unit (HTU) volume and higher device volume as well as favorable pricing. GAAP EPS grew 15% to $1.54 while adjusted EPS rose 1.5% to $1.39.
Smoke free portfolio
In 2022, PMI achieved two important strategic milestones – the acquisition of Swedish Match and the agreement to control IQOS in the US in 2024. In its monthly conference call, the company said that these achievements will help accelerate the transformation of smoke-free. PMI sees great potential to drive the growth of smoke-free products in the US through leading brands like IQOS and ZYN.
The global roll-out of IQOS ILUMA is a top priority for Philip Morris and it expects to make meaningful progress towards this goal in 2023. During the fourth quarter, the company launched ILUMA in eight new markets including Italy, Portugal and South Korea, bringing the total to 16 More than half of the total HTU PMI volume now comes from markets where ILUMA has opened.
The acquisition of Swedish Match and the addition of the popular ZYN nicotine pouch brand open up significant growth opportunities for PMI in the US. In Q4, ZYN shipment volume increased by 35%. In addition, the retail price share remained strong at 75.7%. Philip Morris is also working on the expansion of nicotine pouches into the international market.
Philip Morris expects to post about $13.5 billion in smoke-free net profit in 2023 on a constant currency basis, including the Swedish Match, compared to $10 billion in 2022. This is estimated to be close to 40% of PMI’s total net profit for the year .
Outlook
In 2023, Philip Morris expects organic net profit to grow 7-8.5%, driven by price increases and progress from IQOS. Reported EPS is expected to be $6.09-6.21 in 2023 compared to $5.81 in 2022. Adjusted EPS is expected to be $6.25-6.37 compared to $5.98 in 2022.
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