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Philip Morris International (NYSE:PM) will lead off the earnings season for the tobacco sector with its report due out on April 23. Analysts anticipate the tobacco giant will disclose revenue of $8.47B, EPS of $1.41, EBITDA of $3.47B, a gross margin rate of 63.6%, and an adjusted operating margin rate of 39.6%. A sequential 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 Swedish Match integration are doled out.
Goldman Sachs sees a favorable risk-reward profile on Philip Morris, calling it an attractive growth story led by iQOS and ZYN. Analyst Bonnie Herzog sees a potential upside surprise to both the top and bottom line results, reflecting continued momentum behind iQOS and ZYN, as well as the likelihood PM’s Q1 shipments were stronger as a result of disruptions in the Red Sea to ensure its ability to meet demand. Herzog also offered a reminder that Philip Morris (PM) management sounded upbeat at the CAGNY conference earlier in the year, which she thinks suggests good visibility on iQOS’ strong momentum, combustible cigarette volume stability, and FX headwinds that remain broadly unchanged. Goldman Sachs kept a Buy rating on PM and price target of $118 into the earnings print.
Altria Group (NYSE:MO) will report earnings on April 25 to expectations for revenue of $4.73B and EPS of $1.15. The last EPS revisions on Altria from sell-side analysts have been on the downward side, but Altria has topped EPS marks in four of its last five reports. Jefferies analyst Owen Bennett has his eyes on the capital allocation strategy at Altria (MO). He sees some potential that Altria (MO) will continue to lower its stake in Anheuser-Busch InBev (BUD) after the beer stock rallied more than 15% from its 52-week low. A sale of more BUD shares could boost cash for dividends or be a source for an M&A play, potentially in the Beyond Nicotine space or something in cannabis.
On Seeking Alpha, Investing Group Leader Sensor Unlimited thinks MO’s current dividend yield and valuation ratios are among the most attractive levels in a decade. “Such extraordinary levels suggest that the dividend payouts are unsustainable and/or the underlying business is likely to stagnate terminally. With the analyses above, we conclude that neither scenario is likely, and thus consider the stock a good investment opportunity under current conditions,” read the bullish appraisal. 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:BTI) will also be on watch. While the London-based company only reports earnings twice a year, a positive shift in sector sentiment could provide a boost. Meanwhile, Japan Tobacco (OTCPK:JAPAF) (OTCPK:JAPAY) is due to release Q1 results on May 9. The Geneva, Switzerland-based company could provide an update on next-generation products, including Ploom X. After launching in 2021 in Japan, Ploom X is now in the process of an accelerated roll-out into key markets over the next few years.
