Morgan Stanley has lowered its 2020 earnings per share (EPS) estimate for Philip Morris International (PMI) to $5.16 from $5.62 to reflect lower oil prices, unfavorable currency exchange rate movements and potential demand disruption due to the coronavirus.
According to the investment bank, the spread of the coronavirus through Europe, along with the associated travel restrictions, may reduce demand for both cigarettes and IQOS in key growth markets such as Italy.
The significant decline in oil prices, meanwhile, may impact demand in oil-exporting countries such as Russia, which could lead to lower cigarette consumption, impact the pace of IQOS adoption and drive downtrading in cigarettes, Morgan Stanley analysts wrote in a note to investors.
In addition, the U.S. dollar has strengthened considerably against the currencies of key PMI markets such as Indonesia, Russia and Ukraine.
Despite its EPS expectations adjustment, Morgan Stanley continues to believe that PMI remains well-positioned relative to tobacco and staples peers, supported by its growing mix shift to IQOS, significant operating leverage and strong pricing power, among other factors.