Group 1 - Philip Morris International Inc. (NYSE:PM) is recognized as one of the 15 best performing dividend stocks in 2025, with a stock surge of nearly 36% since the beginning of the year [1][3] - The company has successfully transitioned to next-generation, smoke-free products, such as IQOS heat-not-burn tobacco sticks and ZYN oral nicotine pouches, contributing to its stock performance [3] - Philip Morris has maintained a solid dividend policy, rewarding shareholders with growing dividends for the past 15 years, currently offering a quarterly dividend of $1.35 per share and a dividend yield of 3.31% as of September 15 [4] Group 2 - The company was established in 2007 after splitting from Altria, focusing on international markets where cigarette sales have been stronger [2] - In the second quarter, while cigarette sales volume decreased by 1.5%, organic revenue from cigarettes still grew by 2%, indicating resilience in its core business [2]

Industry Overview - The tobacco industry is experiencing a strong year, contrary to the belief that it is shrinking, with significant sales growth in non-cigarette products [1] - The FDA has agreed to fast-track the approval process for nicotine pouches, a move influenced by the White House, indicating a favorable regulatory environment for the industry [1][3] Product Development - The FDA has historically taken a long time to approve new nicotine delivery methods, but recently approved 20 flavors of Zyn, a leading nicotine pouch brand owned by Philip Morris International, after a five-year review [2] - The agency is now expediting the approval process for pouch products from four industry leaders, with potential legal launches expected by December [3] Financial Performance - A basket of six global tobacco stocks has yielded an average total return of 43% year-to-date, showcasing strong market performance [6] - Philip Morris International reported a 32% year-over-year increase in shipments of oral smoke-free products, surpassing 200 million cans in the Americas [6] - Altria reported a 26% year-over-year growth in shipments of its Zyn competitor, with its share price up 27% year-to-date [6] Historical Context - The tobacco industry has historically outperformed all other sectors in the US from 1900 to 2015, providing financial benefits to municipalities through securitized payments from major tobacco companies [4]

Core Viewpoint - Philip Morris' stock has shown strong performance over the past year, and this trend is expected to continue for the foreseeable future [1]. Group 1: Investment Strategy - The focus is on dividend-paying companies, emphasizing the importance of stable and growing dividends for achieving high risk-adjusted long-term returns [1]. - The approach involves analyzing companies in depth and formulating compelling arguments to enhance the investment process and assist other investors [1]. Group 2: Analyst's Position - The analyst holds a beneficial long position in the shares of Philip Morris and other related companies, indicating a personal investment interest [2].

Core Insights - Philip Morris International Inc. has published its 2025 Sustainability Materiality Report, which includes the results of its latest global sustainability materiality assessment [1] - The report follows the principles of double materiality and outlines key sustainability topics along with their associated impacts, risks, and opportunities [1] - The assessment aligns with the EU Corporate Sustainability Reporting Directive (CSRD) [1] Sustainability Topics - The report identifies key sustainability topics that are significant for the company and its stakeholders [1] - It emphasizes the importance of understanding consumer and end-user perspectives in sustainability efforts [1]

Company Overview - Defiance ETFs has launched the Defiance Daily Target 2X Long PM ETF (Ticker: ZYN), which offers investors 2X daily exposure to the performance of Philip Morris International Inc. (NYSE: PM) [1][2] - Philip Morris International is a leading international tobacco company that manufactures and sells cigarettes, smoke-free products, and associated devices, focusing on transitioning adult smokers to less harmful alternatives through its IQOS platform [3] Fund Objectives and Structure - The ZYN fund aims to deliver daily investment results of 200% of the daily performance of Philip Morris International Inc., utilizing derivatives such as swaps and options to achieve its leveraged objectives [2] - The fund is designed for knowledgeable investors who understand the risks associated with seeking daily leveraged investment results and are willing to actively monitor their portfolios [4][10] Industry Context - The tobacco and reduced-risk product industry faces various challenges, including regulatory pressures, litigation risks, and changing consumer preferences, which could impact the performance of companies like Philip Morris International [9]

Core Insights - Philip Morris is targeting a 13% to 15% growth in EPS for the year, reaffirming its guidance in a recent press release [2] - The company has been undergoing a smoke-free transformation for over 10 years, achieving its strongest growth since 2011, excluding the post-pandemic recovery [2] - Despite focusing on smoke-free products, the company is still seeing positive volume growth across its total business [3] Company Strategy - The emphasis is on transitioning from combustible products to smoke-free alternatives, including heat-not-burn and vaping products [3] - The company is committed to maintaining pressure on its combustible business while promoting smoke-free innovations [3]

Financial Data and Key Metrics Changes - The company reaffirmed its guidance for a 13% to 15% growth in EPS for the closing year [1] - The company reported its strongest growth since 2011, excluding the post-pandemic recovery [2] - There is an expectation of margin expansions this year, with previous hiccups in margins now behind [12] Business Line Data and Key Metrics Changes - Strong growth in IQOS and ZYN volumes, with ZYN already in 47 markets and expanding [5] - The company is experiencing positive volume growth in the tobacco and nicotine industry for five consecutive years [3] - The smoke-free product mix is contributing positively to both top-line revenue and gross margins [4][11] Market Data and Key Metrics Changes - The U.S. market is seeing intensified competition, particularly for ZYN, which has a price premium of over 65% compared to competitors [9][19] - The company is normalizing inventory levels after a period of stock limitations due to undercapacity [7] - The company is observing a strong pricing environment for combustible cigarettes, supported by a favorable tax environment [3] Company Strategy and Development Direction - The company is focused on smoke-free transformation and sees significant growth potential in this category [2][26] - There is a strategic emphasis on multi-category presence, including heat-not-burn, e-vape, and oral nicotine pouches [36] - The company is committed to continuous product innovation to meet evolving consumer expectations [64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the smoke-free product category's growth potential, despite regulatory challenges in some markets [14][42] - The company anticipates that the competitive landscape will remain challenging but believes ZYN has a strong brand position [33] - Management noted that the currency environment is favorable, which supports the company's financial trajectory [57] Other Important Information - The EU is recognizing nicotine pouches for tax purposes, which is seen as a positive development for the company [44] - The company is awaiting regulatory approvals for IQOS in the U.S., with expectations leaning towards a 2026 launch [48] Q&A Session Summary Question: How should one think about ZYN shipment numbers for 2H '25? - Management suggested that shipment numbers should be based on sell-through growth rates applied to previous shipment figures [15][16] Question: What is the pricing strategy for ZYN given the competitive landscape? - Management acknowledged the high price premium of ZYN and indicated that marketing efforts would be ramped up to maintain market presence [20][21] Question: What is the outlook for IQOS growth in light of the flavor ban in Europe? - Management indicated that the flavor ban is being adjusted, and IQOS is expected to return to its growth trajectory [39] Question: How does the company view potential M&A opportunities? - Management stated that the company is currently self-sufficient and does not see immediate gaps in its product portfolio that would necessitate M&A [59][60] Question: What is the expected impact of the EU Tobacco Excise Directive? - Management noted that while the directive is being discussed, it is not expected to create major disruptions for the company's smoke-free product support [43][46]

Financial Data and Key Metrics Changes - The company reaffirmed guidance for a 13% to 15% growth in EPS for the year, marking the strongest growth since 2011, excluding post-pandemic recovery [1][2] - The company reported continuous positive volume growth for five consecutive years, indicating strong revenue quality supported by robust pricing in combustible cigarettes [2][3] Business Line Data and Key Metrics Changes - Smoke-free products, including heat-not-burn and oral nicotine pouches, are contributing positively to both top-line growth and gross margins, with significant growth in IQOS and ZYN volumes [3][4] - ZYN is now available in 47 markets, with ongoing geographical expansion and strong international volume growth [3][4] Market Data and Key Metrics Changes - The company noted intensified competition in the U.S. market for ZYN, with a price premium of over 65% compared to competitors, indicating strong brand positioning [6][7] - The company is observing a normalization of inventory levels after a period of supply constraints, which is expected to stabilize in Q3 [5][6] Company Strategy and Development Direction - The company is focused on a smoke-free transformation, aiming to leverage its strong brand presence in the nicotine pouch market while addressing competitive pricing dynamics [6][39] - The company is committed to multi-category strategies, recognizing the importance of maintaining a presence across various product categories, including heat-not-burn, e-vapor, and oral nicotine pouches [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the smoke-free product category's growth potential, emphasizing the need to follow consumer trends and preferences [34][39] - The company anticipates that regulatory developments in markets like Taiwan and the EU will create opportunities for smoke-free products, although challenges remain [10][50] Other Important Information - The company is preparing for potential share repurchases once leverage is below 2X, supported by favorable currency trends and strong cash flow generation [68][69] - The company is not currently seeking M&A opportunities, feeling self-sufficient in product development capabilities [70][71] Q&A Session Summary Question: How should investors think about ZYN shipment numbers for 2H 2025? - Management indicated that shipment numbers should be calculated based on current inventory levels and expected marketing activities, with a focus on retail off-take [12][15] Question: What is the pricing strategy for ZYN compared to competitors? - Management confirmed that ZYN maintains a significant price premium over competitors, which reflects strong brand equity and market positioning [17][19] Question: What is the outlook for IQOS growth in light of the flavor ban in Europe? - Management noted that while the flavor ban has impacted growth, IQOS is expected to return to its growth trajectory as markets adjust [43][44] Question: How does the company view the competitive landscape for smoke-free products? - Management acknowledged the competitive dynamics but expressed confidence in ZYN's first-mover advantage and the company's ability to navigate challenges [39][40] Question: What are the implications of the EU Tobacco Excise Directive? - Management highlighted that while the directive may increase taxation on cigarettes, it also recognizes smoke-free products, which could be beneficial in the long term [49][50] Question: What is the timeline for the PMTA for IQOS in the U.S.? - Management indicated that the timeline for the PMTA remains uncertain, with expectations leaning towards a 2026 event rather than 2025 [52][53]

Financial Performance & Guidance - PMI confirms its 2025 adjusted diluted EPS guidance, projecting a growth of 13-15% driven by smoke-free products[3] - This growth represents the strongest performance since 2011, excluding the pandemic recovery period[3] - The forecast for reported diluted EPS in 2025 is $7.24 - $7.37, compared to $4.52 in 2024[6] - Adjusted diluted EPS for 2025 is projected to be $7.43 - $7.56, up from $6.57 in 2024[6] - Excluding currency effects, the adjusted diluted EPS growth is expected to be 11.5% - 13.5%, with EPS ranging from $7.33 - $7.46 compared to $6.57 in 2024[6] Business Momentum - PMI experienced strong momentum over the summer months, driven by IQOS growth and international expansion of ZYN and VEEV[3] - Combustible product sales performed better than expected in Turkey and Egypt[3] - The company is intensifying commercial activities in the U S due to increasing competition in the ZYN market, with some inventory normalization expected in Q3[3] - New smoke-free product markets are opening, including Taiwan[3] Factors Affecting Performance - Restructuring charges are estimated at $0.13 per share in 2025, compared to $0.10 in 2024[6] - Amortization of intangibles is projected at $0.50 per share in 2025, up from $0.40 in 2024[6]

Group 1 - Consumer staples companies, including PepsiCo, are generally resilient but can fall out of favor, as seen with PepsiCo's recent performance [1][8] - PepsiCo ranks as the 7th largest consumer staple company with a market cap of approximately $200 billion, and it is one of the most diversified companies in the sector, with strong positions in beverages, snacks, and packaged foods [2][3][5] - PepsiCo has a strong brand recognition and competes effectively in distribution, marketing, and product development, positioning itself as an industry consolidator [6] Group 2 - PepsiCo is a Dividend King, having increased its dividend for 53 consecutive years, indicating a robust business model [7] - Despite being a Dividend King, PepsiCo has lagged behind peers like Coca-Cola, with only 2.1% organic sales growth compared to Coca-Cola's 5% [8] - PepsiCo's stock has declined over 20% from its 2023 highs, marking it as the worst performer among Dividend Kings [9] Group 3 - The current market negativity towards PepsiCo may present a long-term investment opportunity, as the company has a history of overcoming challenges [10] - Recent strategic moves, including acquisitions, and a rising dividend yield of 3.8% suggest that PepsiCo stock is currently undervalued [10][11] - Over the past three months, PepsiCo has been the best-performing stock among the top 10 consumer staples, indicating a potential recovery [12]