1Sem.·

Philip Morris Q2 Earnings

Tomorrow are the Q2 earnings of $PM (-0,05 %) what do you expect?

I will then write a detailed review.

11 Commentaires

John@arvabu

1Sem.

First and foremost, I expect figures.

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TaxesAreTheft@TaxesAreTheft

1Sem.

@arvabu there is no IQOS volume guidance, do you think the growth is back in the double digit range? Q1 was 9%

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Pazzzi@Pazzzi

1Sem.

Strong growth, growth forecast for the year as a whole may be raised 🚀

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TaxesAreTheft@TaxesAreTheft

1Sem.

@Pazzzi Do you think the HTB volume is picking up again?

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Pazzzi@Pazzzi

1Sem.

@TaxesAreTheft Yes, I think so. I'm particularly excited about the growth of the nicotine pouches. I think it will exceed all expectations.

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TaxesAreTheft@TaxesAreTheft

1Sem.

@Pazzzi I don't know if it will be that good, Zyn had a lot of competition with Velo Plus in Q2. HTB >=10% would be very good in volume. Zyn should grow in the mid teens.

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Pazzzi@Pazzzi

1Sem.

@TaxesAreTheft I just looked at the Q2 numbers. HTU shipment growth +9.2% YoY and nicotine pouch growth +43.3% YoY are good. Revenue growth is in line with guidance and EPS growth is surprisingly good. The full-year guidance was also raised. I am personally satisfied and expected these figures. I can't quite understand this strong negative market reaction. What do you think of the figures?

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TaxesAreTheft@TaxesAreTheft

1Sem.

@Pazzzi I expected the relative volume drop off, but I didn't expect the decline to be absolute Q1 +4bn units Q2 +3.3bn units (HTU). I recently had a very revealing conversation with a saleswoman in a Wolsdorf, they sell almost as much Terea as normal cigarettes, which is quite something. The existing markets are already quite close to saturation, IQOS has to reach US consumers, otherwise I think the HTU volume will level off between 5-8%, which is still very good. Zyn has lost market share at least in volume share, the BAT numbers with Velo will give more information on that, not a big problem in itself, but should be kept in mind. Zigatten performed ok, which was to be expected. Veev is doing great. I think the guidance miss was a pretty bad signal, PM triggered too much euphoria in Q4 and Q1.

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Pazzzi@Pazzzi

1Sem.

@TaxesAreTheft Yes, the expectations were too high, so the high discount today is logical. I've just seen that you have a very high $BATS weighting in your portfolio. Do you think this company will perform better than $PM? I'm put off by the high dependence on the cigarette business at $BATS. I would be interested in your opinion on this!

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TaxesAreTheft@TaxesAreTheft

1Sem.

@Pazzzi Ich hab mal einen langen Vergleichs Post zu dem Thema gemacht. Long Story short, BAT ist ein Value play. Mein yield on cost ist etwa 10%, mit share buybacks und gutem RRP portfolio ist das top. Was das Zigaretten Geschäft angeht, kommt es auf die persönliche these an. Ich zitiere mich mal selbst "The tobacco industry is one of the best performing sectors in the history of the Stockmarket in terms of total shareholder value.
The tobacco/nicotine business is cyclical.
The industry lives through product cycles, some longer some shorter. The 70-90s marked the hight of the cigaret consumption in the west, which was the beginning of the phaseout of traditional cigarettes.
In developing countries generally peaked in the mid 2010s with some markets still growing and moving towards their peak.
The 2030s will most likely mark the somewhat "end" for the cigaret product cycle, as the volumes in western countries reach new all time lows quarterly. Ofc some people will still smoke their cigs, but RRP will replace cigs as the primary nicotine delivery system.
The 2010 marked the beginning of a new product cycle (RRP) which captures both old and new consumers.
So why was the tobacco performance not random?
Big Tobacco never lost their FCF strength, which supports dividends and buybacks. The extrem low valuations were caused by major selloffs related to the rise of ESG and great misunderstanding of the sector (cyclicality of products). Investors believed that the FCF will implode in a matter of a couple years.
In reality big tobacco is facing a normal evolution through its product cycle. RRP are more profitable than traditional cigs, thus big nicotine will be more profitable than ever and return to FCF growth.
Buying these stocks at historical low valuations in early 2024, if you understood the sector, was a clear 101 of value investing." Ich persönlich denke das auch noch in 100 Jahren Zigaretten geraucht werden.

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Pazzzi@Pazzzi

1Sem.

@TaxesAreTheft Very interesting, I am of the same opinion. I read in my research that just 3% of smokers manage to quit. In addition, customers remain loyal to their cigarette brand for an above-average length of time, often for life. I'm betting on this effect and hope for something similar with IQOS and ZYN. The current "first mover effect" with the already high market share of $PM plays a role here. It is actually difficult to compare the two companies, as $PM currently stands for growth and $BATS for cash flow and dividend yield.

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