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TAKEAWAY
Philip Morris is slated to release its Q4 and full-year 2019 results on February 06, 2020. For FY2019, Trefis estimates that the company will report:
Revenues of $30 billion (vs. consensus estimate of $29.9 billion), which would be 1.4% higher than 2018, primarily due to strong growth in the heated tobacco segment, partially offset by lower cigarette volume soldEPS of $5.21 (vs. consensus estimate of $5.20), which would be 2.5% higher than $5.09 reported in 2018, due to higher revenue, with expenses increasing at a lower rate, thus pushing net income margin higher
We believe that better-than-expected revenues and earnings for FY2019, will likely result in Philip Morris' stock price rising once earnings are announced. In fact, our forecast indicates that Philip Morris Valuation is $93 a share, which is roughly 8% above its current price of $86.
Our purpose? Shining the spotlight on key assumptions + data.
You can chime in with your own informed view right here.
The sections below lay out our hypothesis and one set of expectations
Price Estimate [(AxB)/C]xD
Total Revenue [A]
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Net Income Margin [B]
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No of shares [C]
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P/E Ratio [D]
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(1) Revenues are expected to be marginally above consensus estimates
Trefis estimates Philip Morris' 2019 revenues to be $30 billion, roughly 0.3% above the consensus estimate of $29.9 billion
Trefis Estimate of Total Revenue
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(1) Combustible Products $24.8 Bil (83%)
(2) Heated Tobacco $5.2 Bil (17%)
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TOTAL $30.0 Bil
Consensus $29.9 Bil
Surprise $0.1 Bil
(2) EPS likely to narrowly exceed consensus estimates
Philip Morris' 2019 earnings per share (EPS) expected to be $5.21 per Trefis analysis, slightly higher than the consensus estimate of $5.20 per share
EPS - 2019E
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Total Revenues $30.0 Bil
- Total Expenses $21.9 Bil
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Net Income $8.1 Bil
÷ Shares Outstanding 1.6 Bil
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EPS $5.21
Consensus $5.20
Surprise $0.01
(3) Stock price estimate ~8% higher than the market price
Trefis' forecast for Philip Morris' 2019 earnings and well as P/E multiple is higher than consensus, working out to a fair value of $93 for Philip Morris' stock as opposed to the current market price around $86
Stock Price [A x B]
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EPS - 2019E [A]
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Trailing P/E Multiple [B]
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Related Analysis
Philip Morris Revenues: How Does Philip Morris Make Money?
Philip Morris Valuation: Expensive or Cheap?
How Does Philip Morris Spend Its Money?
Philip Morris' Heated Tobacco Products: Why Are E-Cigarette Volume Sales Increasing, And What Does This Mean For Philip Morris?
Importance Of Heated Products To Philip Morris' Stock
Details about our forecast for Philip Morris' (1) Revenues, (2) EPS, and (3) P/E Multiple follow:
(1) Revenue is expected to increase 1.4% from $29.6 billion in 2018 to $30.0 billion in 2019
Strong growth in Reduced Risk (Heated Tobacco) Products, driven by higher volume sales and gradual phasing out of discounts is expected to lead to rise in revenue.
Total Revenue [A + B]
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Combustible Products [A]
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Reduced Risk Products [B]
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What about Revenues in 2020?
For the full year, we expect net revenue to increase by 1.4% to $30 billion in 2019 from $29.6 billion in 2018, and further by 3.6% to $31.1 billion in 2020, as sales under the company's heated tobacco segment are expected to pick up further. Overall, the company is expected to add $1.5 billion to its revenue base by the year 2020.
FDA nod for the IQOS product is likely to provide the biggest boost to the company's top line in the medium term
Our interactive dashboard analysis, Philip Morris Revenues: How Does Philip Morris Make Money?, provides an in depth view of the company's revenues along with our forecasts and a comparison of trends with Altria.
What about Expenses and Earnings in 2020?
For 2020, we forecast a modest rise in revenue as well as expense growth rates. However, with revenue growth still expected to remain slightly higher than expense growth rate, the net income margin is likely to rise marginally to 28%
View Trefis interactive dashboard How Does Philip Morris Spend Its Money? to understand the company's expenses
(3) A trailing P/E multiple of 17.9x looks appropriate for Philip Morris' stock, as opposed to the current implied P/E multiple of 16.6x
We use our full cash flow model for Philip Morris to arrive at a P/E multiple of 17.9x for a price estimate of $93
Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year
Philip Morris P/E Multiple
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Altria P/E Multiple
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Related Analysis
Our Complete Set Of Analyses On Philip Morris
1. How to save your forecasts for Philip Morris:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.
