Philip Morris International Inc. (NYSE: PM) reported its first quarter financial results, but missed revenue estimates. Shares plunged by 17.1 percent during mid-day Thursday after global smoking rates began to decline.
For the first quarter, PMI reported revenue of $6.9 billion, increasing 13.7 percent year over year, but missing analysts’ estimates of $7.03 billion. The cigarette producer reported an EPS of $1.00, increasing 2 percent year over year and topping analysts’ estimates of $0.90.
PMI saw its unit shipment volume slip in the quarter, showing signs of smoking rates declining. Cigarette and heated tobacco unit shipment volume was 173.8 billion, falling 2.3 percent year over year. Overall cigarette shipment volume decreased by 9.3 billion units or 5.3 percent.
Out of all the international markets, only South and Southeast Asia reported year over year cigarette sales growth. Every other segment witnessed significant declines. PMI’s biggest market’s, European Union, sales fell by 6.7 percent. Eastern Europe sales fell by 10.4 percent and East Asia and Australia sales fell by 18.3 percent.
PMI’s top cigarette brand, Marlboro saw shipment volume decrease by 7.1 percent year over year, shipping 57.9 billion units. Sales fell due to declines in Germany, Japan and Saudi Arabia. L&M brand shipped the second most at 19.2 billion.
Due to the declining smoking rates, many tobacco companies are trying to reshape their portfolios with new smoking technology. PMI pushed for its product, iQOS, which warms tobacco enough to emit a smoke-like vapor, but not hot enough to cause burning, negating one of the harmful effects of smoking cigarettes.
PMI Chief Executive Officer Andre Calantzopoulos says he sees the iQOS and its other similar related products as the future of smoking where majority of smokers will switch to the alternatives.
iQOS is available in 38 different markets, especially in Japan where it has become widely popular, although it was not as successful as the company had hoped for.
“Even if this temporary dynamic in Japan persists, we remain on track to double our worldwide in-market sales of heated tobacco units compared to 2017." said Calantzopoulos.
PMI is awaiting the U.S. Food & Drug Administration’s approval to sell iQOS and promote it as an option that is less harmful than conventional smoking.
PMI forecasts a full year diluted EPS o $5.25 to $5.40, representing a 35 percent to 39 percent increase year over year.