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Philip Morris International (NYSE: PM) will open earnings season for the tobacco sector with its report due out on April 23. Analysts expect the tobacco giant to reveal revenue of $8.47 billion, earnings per share of $1.41, EBITDA of $3.47 billion, a gross margin rate of 63.6% and an adjusted operating margin rate of 39.6%. A resulting decline in cigarette volume is also expected due to weakness in the Americas. The conference call is seen as a potential catalyst if more details on the integration of the Swedish match are provided.
Goldman Sachs sees a favorable risk-reward profile in Philip Morris, calling it an attractive growth story led by iQOS and ZYN. Analyst Bonnie Herzog sees a potential upside surprise for both bottom-line and bottom-line results, reflecting continued momentum behind iQOS and ZYN, as well as the likelihood that PM’s first-quarter shipments were stronger following disruptions in Red Sea to ensure its ability to meet demand. Herzog also noted that Philip Morris (PM) management expressed optimism at the CAGNY conference earlier this year, which she said suggests good visibility on iQOS’s strong momentum, stable combustible cigarette volume and headwinds on forex which remain essentially unchanged. Goldman Sachs maintained a buy rating on PM and a $118 price target in the earnings release.
Altria Group (NYSE:MO) will report earnings on April 25 with expectations for revenue of $4.73 billion and EPS of $1.15. The latest EPS revisions on Altria from sell-side analysts have been downward, but Altria has topped EPS scores in four of its last five reports. Jefferies analyst Owen Bennett has his eyes on Altria’s (MO) capital allocation strategy. He sees potential that Altria (MO) will continue to reduce its stake in Anheuser-Busch InBev (BUD) after beer shares rallied more than 15% from their 52-week low. A sale of more BUD shares could increase cash for dividends or be a source for an M&A deal, potentially in the Beyond Nicotine space or something in the cannabis space.
On Seeking Alpha, the leader of investment group Sensor Unlimited believes MO’s current dividend yield and valuation ratios are among the most attractive levels in the past decade. “Such extraordinary levels suggest that dividend payments are unsustainable and/or that the underlying business is likely to permanently stagnate. With the above analyses, we conclude that neither scenario is likely, and therefore we view the stock as a good trading opportunity. investment in current conditions,” read the bullish rating. SA analyst The Gaming Dividend is also bullish, writing that Atria Group (MO) continues to offer extreme value to shareholders at the current price level.
Other players: British American Tobacco (NYSE:ITV) will also be on call. Although the London-based company only reports earnings twice a year, a positive change in industry sentiment could provide a boost. Meanwhile, Japan Tobacco (OTCPK:JAPAF) (OTCPK:JAPAY) will report first-quarter results on May 9. The Geneva, Switzerland-based company may provide an update on next-generation products, including Ploom X. After launching in 2021 in Japan, Ploom