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By Brian Nelson, CFA
Philip Morris (PM) recently reported better than expected second quarter results with revenue and non-GAAP earnings per share exceeding the respective consensus forecasts. Net revenues increased 10.4%, to $11.2 billion, with both its smoke-free (up 11.7%, 9.7% organically) and combustibles (up 9.5%, 6.1% organically) businesses driving the growth. Its smoke-free portfolio now accounts for 42% of total net revenues with smoke-free products now available in 109 markets.
Management had the following to say about the results:
We delivered outstanding results in the second quarter, driving net revenues to over $11 billion for the first time with excellent growth across all headline metrics.
With a robust first half under our belt, including continued momentum and strong results in our smoke-free business, we are well positioned to deliver on our full-year targets while investing for future growth.
In the second quarter, Philip Morris’ gross profit increased 11.5% (8.7% organically) thanks to strong pricing, scale and smoke-free products mix. Operating income increased 22% (10.7% organically). Adjusted diluted earnings per share of $2.20 grew 15.2%, or 13.6% excluding currency impacts. Consensus was at $2.05. Earlier this month, Philip Morris updated its full-year guidance for currency. Management now expects to deliver adjusted diluted earnings per share of $8.35-$8.50, the midpoint better than consensus expectations of $8.38. On September 18, Philip Morris raised its quarterly dividend to $1.60 per share, now implying a forward estimated dividend yield of 3.3%. We continue to like Philip Morris as an idea in the High Yield Dividend Newsletter portfolio.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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