Philip Morris Drops as Guidance Fails to Impress

This article first appeared on GuruFocus.

Tobacco stocks took a hit Thursday after Philip Morris (NYSE:PM) reported quarterly results that started strong but ended on a sour note. The company beat earnings and revenue expectations, but its modest profit guidance hike wasn't enough to satisfy investors who were expecting more.

Warning! GuruFocus has detected 4 Warning Signs with PM. Is PM fairly valued? Test your thesis with our free DCF calculator.

Philip Morris now sees full-year adjusted earnings between $7.46 and $7.56 a share, raising only the lower end from $7.43, and expects revenue growth of 6%8%, roughly in line with forecasts. The company also dialed back its organic operating income growth target to 10%11.5% from 11%12.5%, blaming higher spending to support its fast-growing Zyn nicotine pouch business. It also warned of a 20 million30 million Zyn can inventory reduction after aggressive promotions last quarter.

CEO Jacek Olczak acknowledged expectations were very high but said the company's long-term growth story remains intact, powered by Zyn and other smoke-free products. Still, shares of PM slid, pulling down peers like Greenlane (NASDAQ:GNLN), Turning Point Brands (NYSE:TPB), British American Tobacco (NYSE:BTI), and Altria (NYSE:MO), which reports results next week.

View Comments