Cigarettes are said to be a recession-resistant product because people will smoke in good times and bad, and Philip Morris International (NYSE:PM) reported first-quarter that seems to underscore that belief.
Despite the coronavirus pandemic that has created havoc worldwide, the tobacco giant says it witnessed limited impact to its business during the period.
It did note, though, that as the healthcare crisis deepened and social distancing became more prevalent, it expects the stay-at-home orders in place around the globe will have an effect on its business, so it is withdrawing its full-year guidance.
The harder times are coming
Philip Morris said revenue rose 10% on a currency-adjusted basis while adjusted earnings rose 11% to $1.21 per share as price increases and sales of its heated tobacco products continue to gain traction.
Where cigarette shipment volumes were down 4.4% year over year, shipments of its IQOS heat-not-burn electronic cigarette surged over 45% to 16.7 billion units.
CEO Andre Calantzopoulos said in a statement that although the first quarter was strong, "unemployment and related reductions in disposable income will have a temporary impact on market dynamics or the ability of certain small retailers to operate."
As a result, the tobacco giant says it is withdrawing its forecast for earnings of at least $5.50 per share in 2020. However, Philip Morris International can offer second-quarter guidance, because it has greater visibility. It expects EPS to be in a range of $1 to $1.10, which includes a $0.12 per share hit from currency fluctuations. It also expects sales to fall 8% to 12% due to COVID-19, the disease caused by the coronavirus, including lower IQOS sales.