Core Viewpoint - Philip Morris International's stock has experienced a pullback despite strong performance, presenting a potential buying opportunity for investors [1][10]. Group 1: Financial Performance - In Q3, organic revenue rose 5.9% year-over-year to $10.8 billion, with adjusted earnings per share (EPS) climbing 17.3% to $2.24 [7]. - Traditional cigarette volumes fell by 3.2% to 157.9 billion units, but the company reported better-than-expected results in Turkey [6]. - Segment organic revenue increased by 1% to $6.4 billion, and gross profits rose 4.8% to $4.3 billion due to price hikes offsetting volume declines [6]. Group 2: Product Performance - Zyn, the company's nicotine pouch brand, saw U.S. shipments increase by 37% in Q3, with retail sales volumes soaring by 39% [3]. - The heated tobacco units (HTUs), including the Iqos system, experienced a 15.5% increase in sales volumes to 40.8 billion units [4]. - The e-vapor product, Veev, saw shipments surge 91% to 900 million units, maintaining the No.1 market share in eight countries [4]. Group 3: Guidance and Strategy - Management maintained its full-year guidance for organic revenue growth at 6% to 8% while slightly increasing the adjusted EPS forecast to $7.46 to $7.56 [9]. - The company invested approximately $100 million in promotions to boost Zyn volumes, which accounted for a single-digit percentage of shipments in the quarter [11][12]. - Zyn's promotional activity was previously low due to supply constraints, and the strategy aims to attract users of other nicotine products [12]. Group 4: Valuation - Philip Morris' stock is trading at a forward price-to-earnings (P/E) ratio of under 18, with a price/earnings-to-growth (PEG) ratio of under 0.7, indicating potential undervaluation [14]. - The forward yield is just below 4%, making it an attractive investment opportunity in the defensive growth stock category [14][15].

Market Performance - The S&P 500 index increased by 2.4% this week, while the Nasdaq rose by 3.9%[1] - Large-cap growth stocks (Russell 1000 Growth) outperformed with a gain of 3.2%, compared to small-cap value (Russell 2000 Value) at +2.5%[1] - The technology hardware and equipment sector led the gains with an increase of 3.9%[1] Fund Flows - Estimated fund flow for S&P 500 components was +$65.6 billion this week, down from +$91.7 billion last week[2] - Semiconductor products and equipment saw the highest inflow at +$22.9 billion, while media and entertainment experienced the largest outflow at -$13.2 billion[2] Earnings Forecast - The forward 12-month EPS estimate for S&P 500 components was revised up by 0.4% this week, consistent with the previous week[3] - The automotive sector saw a significant upward revision of 9.0% in earnings expectations, while durable goods and apparel experienced a downward revision of -0.5%[3] Risk Factors - Key risks include uncertainties in economic fundamentals, international political situations, U.S. fiscal policies, and Federal Reserve monetary policies[3]

Financial Performance - Net revenues for the nine months ended September 30, 2025, reached $30.3 billion, an increase of $2.1 billion or 7.5% compared to the same period in 2024[296]. - Diluted earnings per share (EPS) for the nine months ended September 30, 2025, was $5.89, reflecting a 20.4% increase from $4.89 in the same period of 2024[301]. - Operating income for the nine months ended September 30, 2025, was $11,519 million, up from $10,143 million in 2024, reflecting a 13.6% increase[335]. - Net revenues for Q3 2025 reached $10.8 billion, an increase of $0.9 billion or 9.4% compared to Q3 2024, driven by higher combustible tobacco pricing and increased smoke-free product volumes[315]. - The diluted EPS for Q3 2025 was $2.23, representing a 13.2% increase from $1.97 in Q3 2024, with operational improvements contributing $0.21 to the EPS growth[321]. - Net earnings attributable to PMI for the nine months increased by 20.6% to $9.2 billion, with basic and diluted EPS rising by 20.4% to $5.90 and $5.89 respectively[368]. Revenue Drivers - The increase in net revenues was driven by favorable pricing variance due to higher combustible tobacco pricing and higher smoke-free products volume, despite lower cigarette volumes[298]. - Smoke-free product revenues grew by 16.0% to $12,500 million for the nine months ended September 30, 2025, compared to $10,773 million in 2024[336]. - Total combustible tobacco revenues increased by 2.2% to $17,786 million for the nine months ended September 30, 2025, compared to $17,399 million in 2024[336]. - The favorable pricing and volume/mix in the Europe segment were partly offset by increased marketing, administration, and research costs[318]. Market and Product Insights - As of October 2025, smoke-free products were available for sale in 100 markets, with IQOS, ZYN, and VEEV being the leading brands in the smoke-free products portfolio[286]. - The company’s net revenues from the SSEA, CIS & MEA region reached $8,942 million for the nine months ended September 30, 2025, up from $8,393 million in 2024, reflecting a 6.5% increase[335]. - The total shipment volume for the nine months ended September 30, 2025, was 592.7 billion equivalent units, representing a 1.8% increase compared to the same period in 2024[357]. - The total shipment volume of oral products reached 939.5 million cans for the nine months ended September 30, 2025, a 25.8% increase from 747.0 million cans in 2024[343]. Organizational Changes - The company plans to implement a new organizational model effective January 1, 2026, transitioning from four geographic segments to three new segments: International Smoke-Free, International Combustibles, and U.S.[283]. - The acquisition of Swedish Match AB in 2022 was a key milestone in the company's transformation towards becoming a smoke-free company, enhancing its oral nicotine product portfolio[289]. Impairments and Charges - The company recorded pre-tax restructuring charges of $243 million for the nine months ended September 30, 2025, related to the cessation of combustible tobacco production in two factories in Germany[301]. - The company recorded a goodwill impairment charge of $41 million during the second quarter of 2025, primarily due to a decline in estimated fair value of a reporting unit in the Europe segment[302]. - In Q3 2025, PMI recorded a non-cash after-tax impairment charge of $146 million, resulting in a diluted EPS charge of $0.09 per share, due to a reassessment of an equity investment in the Wellness & Healthcare business[310]. Future Outlook - For the full year 2025, the company expects total cigarette and smoke-free product shipment volume growth of around 1%, with smoke-free product volume growth projected at 12% to 14%[360]. - The estimated international industry volume decline for cigarettes and heated tobacco units (HTUs) is around 1% for 2025, excluding China and the U.S.[356]. - The company expects negligible revenue from cannabinoids in the near to medium term, despite ongoing development in the Wellness and Healthcare business[288]. Regulatory Environment - Legislative and regulatory challenges, including high excise taxes and restrictions on SFPs, are expected to impact PMI's profitability and market access[461]. - The EU is revising its Tobacco Excise Directive to include smoke-free products, with an implementation date proposed for January 1, 2028[476].

Investment Rating - The report assigns an "Overweight" rating for the new tobacco industry, particularly focusing on the new oral nicotine pouch segment [3]. Core Insights - The industry is experiencing clear trends driven by supply-demand dynamics, leading to accelerated growth in the new tobacco sector, with international tobacco giants increasing their investments [2]. - New oral nicotine products, which combine characteristics of heated non-combustible and vaporized electronic cigarettes, are gaining popularity due to their flavor variety and convenience, presenting a significant market opportunity [3][58]. - The report highlights that the new oral nicotine segment is expected to have the highest gross margins among new tobacco products, making it an attractive area for investment [3]. Summary by Sections 1. Oral Tobacco Industry - The global penetration rate for oral tobacco is currently at 1%, with a projected CAGR of 27% from 2023 to 2028, indicating strong growth potential [18][58]. - New oral nicotine products are expected to grow at a CAGR of 35% during the same period, with the market size reaching €15 billion by 2028 [18]. 2. Traditional Oral Tobacco - Traditional oral tobacco products have a focused audience and are primarily used in specific scenarios, with historical roots in Sweden and North America [54]. 3. New Oral Tobacco - The introduction of nicotine pouches, such as ZYN by Swedish Match, has marked the beginning of a new market segment, with significant growth observed in the U.S. market [58]. - The new oral tobacco products are characterized by their non-tobacco composition, lower health risks, and a variety of flavors, which cater to diverse consumer preferences [58][61]. 4. Industry Leaders - **Philip Morris International (PMI)**: After acquiring Swedish Match for $16 billion, PMI has established itself as a global leader in the new oral tobacco market, with a market share of 42% [76][78]. - **Altria**: Focused on the U.S. market, Altria's new oral tobacco brand "On!" has seen a CAGR of 49% from 2021 to 2024 [81]. - **British American Tobacco (BAT)**: Concentrating on the European market, BAT holds a significant share in the new oral tobacco segment, particularly in six core markets [84]. - **Haypp Group**: A leading online sales platform for nicotine pouches, Haypp is expected to achieve a revenue of 5 billion Swedish Krona in 2025, reflecting the industry's high growth potential [90][93]. 5. Valuation Review - The new oral tobacco segment is becoming a crucial valuation driver for companies in the tobacco industry, with significant investments and acquisitions indicating strong future prospects [3][22].

When I last wrote about the tobacco stock Philip Morris International Inc. (NYSE: PM ) in July, it was clear that the stock was a long-term Buy, even as a short-term pullback was on theManika is a macroeconomist with over 20 years of experience in industries including investment management, stock broking, investment banking. She also runs the profile Long Term Tips [LTT], which focuses on the generational opportunity in the green economy. Her investing group, Green Growth Giants , takes the theme a step fur ...

When I last wrote about the tobacco stock Philip Morris International Inc. (NYSE: PM ) in July, it was clear that the stock was a long-term Buy, even as a short-term pullback was on theManika is a macroeconomist with over 20 years of experience in industries including investment management, stock broking, investment banking. She also runs the profile Long Term Tips [LTT], which focuses on the generational opportunity in the green economy. Her investing group, Green Growth Giants , takes the theme a step fur ...

Core Insights - Philip Morris International Inc. reported strong third-quarter 2025 results, with both revenue and earnings exceeding expectations and showing year-over-year growth [1][2][9] Financial Performance - Adjusted earnings for the quarter were $2.24, reflecting a 17.3% increase year over year, surpassing the Zacks Consensus Estimate of $2.10 [2][9] - Net revenues reached $10,845 million, a 9.4% increase on a reported basis and 5.9% on an organic basis, exceeding the Zacks Consensus Estimate of $10,704 million [3][9] - The smoke-free business contributed significantly, with revenues increasing 17.7% and accounting for 41% of total revenues [4][9] Segment Performance - Revenues from combustible products grew 4.3% year over year, driven by high single-digit pricing, despite expected volume declines [4] - Total shipment volumes increased by 0.7% to 204.9 billion units [5] Regional Performance - In Europe, net revenues grew 12.4% to $4,719 million, supported by positive pricing and volume/mix, despite lower cigarette volumes [6] - The SSEA, CIS & MEA regions saw a 10.4% increase in net revenues to $3,273 million, primarily due to favorable pricing [7] - The EA, AU & PMI GTR regions also experienced a 10.4% revenue growth to $1,768 million, driven by favorable volume/mix [8] - Revenues in the Americas declined by 5.5% to $1,085 million, mainly due to unfavorable price variance [8] Future Outlook - For 2025, adjusted EPS is projected in the range of $7.46-$7.56, indicating a growth of 13.5-15.1% [11] - The company expects net revenues to increase by 6-8% on an organic basis and operating income to rise by 10-11.5% [13] - Capital expenditures are anticipated to be nearly $1.6 billion, primarily for smoke-free business investments [13] Other Updates - The company ended the quarter with cash and cash equivalents of $4,037 million and announced an 8.9% increase in its quarterly dividend to $1.47 per share [10]

Core Insights - Philip Morris International (PM) reported third-quarter 2025 results that exceeded Zacks Consensus Estimates for both revenue and earnings, reflecting strong growth prospects despite a recent stock correction [1][2] Financial Performance - Adjusted earnings per share (EPS) for Q3 2025 was $2.24, a 17.3% increase year-over-year, surpassing the Zacks Consensus Estimate by 6.67% [3] - Net revenues reached $10.8 billion, marking a 9.4% increase on a reported basis and 5.9% on an organic basis compared to the same quarter last year, with a positive surprise of 1.32% against the consensus estimate of $10.7 billion [4] - Operating income for the quarter was $4.3 billion, reflecting a substantial increase of 16.7% from the previous year [4] Product Shipment and Growth - Total shipment volume of cigarettes and smoke-free products grew by 0.7% year-over-year to 204.9 billion units, driven by a 91.0% increase in E-vapor shipments and a 16.9% rise in Oral smoke-free products [5] - The smoke-free business accounted for 41% of total net revenues, up 2.9 percentage points from the previous year, with a year-over-year growth of 17.7% in its top line and a 19.5% increase in gross profits [6] Future Guidance - For 2025, PM anticipates adjusted EPS in the range of $7.46-$7.56, indicating a growth of 13.5-15.1% from the previous year [7] - The company expects net revenues to increase by 6-8% on an organic basis and operating income to grow by 10-11.5%, alongside a projected smoke-free product volume growth of 12% to 14% [8]

Core Insights - The focus is on analyzing undervalued and disliked companies or industries with strong fundamentals and good cash flows, particularly in sectors like Oil & Gas and consumer goods [1] - Energy Transfer is highlighted as a company that was previously overlooked but now shows potential for substantial returns [1] - The approach emphasizes long-term value investing while also considering deal arbitrage opportunities in various sectors [1] Company Analysis - Energy Transfer is identified as a company that has been undervalued and is now seen as a strong investment opportunity [1] - The analyst expresses a preference for companies with understandable business models, avoiding high-tech and certain consumer goods sectors [1] Investment Philosophy - The investment strategy prioritizes long-term value while occasionally exploring short-term arbitrage opportunities [1] - There is a clear skepticism towards cryptocurrencies, indicating a preference for traditional investment avenues [1]

Core Insights - Philip Morris International Inc. has been under observation due to its comparable operations with Altria, particularly after the release of its Q3 earnings [1] Company Analysis - The company is recognized for its strong fundamentals and good cash flows, making it an attractive option for long-term value investing [1] - There is a focus on undervalued and disliked companies or industries, which could offer substantial returns [1] Investment Strategy - The investment approach emphasizes long-term value while also considering potential deal arbitrage opportunities in various sectors [1] - The analyst expresses a preference for sectors such as Oil & Gas and consumer goods, while avoiding high-tech and certain consumer goods like fashion [1]