Perhaps not surprisingly, defensive stock Philip Morris International ( PM ) has been one of the best-performing US companies this year. When I initially covered the stock in November 2024, I argued that it was a best-in-class defensive stock with strongI am an investment professional with a background in both equity and real estate markets. I specialize in identifying long-only opportunities that offer safe and growing dividends, aiming to outperform the broader market on a risk-adjusted return basis. In a ...

Core Insights - Philip Morris International (NYSE: PM) has experienced a significant increase of 66% over the past year, outperforming NVIDIA's (NVDA) 12-month returns amidst a broader market trend [1]. Company Performance - The stock performance of Philip Morris International has been notably strong, with a 66% rise in value over the last year, indicating robust investor interest and confidence in the company's future prospects [1]. Market Context - The current market environment shows a shift in investor focus, with analysts primarily concentrating on AI technologies, yet Philip Morris is achieving substantial returns that surpass those of major tech companies like NVIDIA [1].

Economic Outlook - The U.S. economy is showing signs of potential recession, with the Atlanta Federal Reserve predicting a 2.1% decline in Q1 GDP after earlier forecasts of over 2% growth [1] Walmart - Walmart is positioned as a top defensive stock, having gained 2% during the Covid recession while the S&P 500 lost 25%, and rose 12% during the Great Recession of 2008-2009 [2][3] - The company benefits from its size and scale, providing significant buying power that allows it to be a price leader during economic downturns [4] - Walmart's extensive reach means 90% of the U.S. population lives within 10 miles of a store, which supports its Walmart+ membership growth, particularly among wealthier consumers [5] - Upper-income households, defined as those earning $100,000 or more, have been a key growth driver for Walmart, potentially increasing their patronage during a recession [6] - Walmart is also expanding its advertising and online marketplace businesses, enhancing fulfillment capabilities for third-party merchants [7] Philip Morris International - Philip Morris International's traditional cigarette business remains strong, with modest volume growth and strong pricing power, particularly in international markets [8] - The company's smokeless products, such as Zyn and IQOS, are significant growth drivers, with Zyn projected to see volume growth of 34% to 41% this year [9] - IQOS has also experienced solid growth, with plans for broader rollout in the U.S. pending FDA approval [10] - Zyn and IQOS offer better unit economics compared to traditional cigarettes, with Zyn's contribution level being six times greater and IQOS's twice as good [11] - The addictive nature of Philip Morris' products makes them resilient during economic downturns, and the company offers a 3.5% dividend yield, making it an attractive growth stock in a defensive industry [12]

Core Insights - The article emphasizes the importance of conducting personal in-depth research and due diligence before making investment decisions [3]. Group 1 - The analysis is intended for informational purposes and should not be considered professional investment advice [3]. - There is a clear statement that past performance does not guarantee future results, highlighting the inherent uncertainties in investment [4]. - The article expresses that the views or opinions may not reflect those of the platform as a whole, indicating a diversity of perspectives among analysts [4].

Group 1 - Proactive provides fast, accessible, informative, and actionable business and finance news content to a global investment audience [2][3] - The news team covers a wide range of sectors including biotech, pharma, mining, natural resources, battery metals, oil and gas, crypto, and emerging technologies [3] - Proactive has a presence in key finance and investing hubs with bureaus and studios located in major cities such as London, New York, and Sydney [2] Group 2 - The company emphasizes the use of technology to enhance workflows and improve content production [4] - Proactive employs automation and software tools, including generative AI, while ensuring all content is edited and authored by humans [5] - The team consists of experienced journalists who bring valuable expertise to the content creation process [4]

Core Insights - Philip Morris International is accelerating its smoke-free transformation, achieving significant organic growth in both revenue and profit [2] - The smoke-free business now accounts for 40% of the company's total revenues and gross profits, indicating strong momentum and profitability in this segment [2] - The company is expanding its presence in the U.S. market with products like ZYN and plans to introduce ILUMA, signaling a strategic growth phase [2] Company Overview - The conference featured key executives including the CEO Jacek Olczak and CFO Emmanuel Babeau, highlighting the company's leadership [1][3] - The company recently announced its annual results, reflecting on the dynamic nature of the tobacco and nicotine industry [4]

Core Viewpoint - Philip Morris International has transformed into a strong growth company driven by its smoke-free business, with significant stock performance improvements over the past year [1][10]. Financial Performance - The company's organic revenue rose 7.2% year over year to $9.7 billion, with adjusted earnings per share (EPS) climbing 14% to $1.55 [5][6]. - Gross profits increased 12.6% organically, with Zyn and IQOS having higher gross margins than traditional cigarettes [7]. Growth Drivers - Zyn, a nicotine pouch brand, saw volumes surge 46.2% in Q4 to 183.8 million cans, and is expected to grow between 34% to 41% in 2025 [3][11]. - Heated tobacco units (HTUs) volumes rose 5.1% to 35.7 billion units, with a 13% increase when excluding inventory effects, driven by markets in Japan and Europe [4][11]. - Traditional cigarette volumes increased by 1.1% to 152.8 billion units, with a slight market share decline outside the U.S. and China [5]. Future Guidance - The company anticipates organic revenue growth of 6% to 8% and adjusted EPS between $7.04 to $7.17, indicating growth of 10.5% to 12.5% in constant currency [8][9]. - Expected operating cash flow is about $11 billion, with $1.5 billion allocated for capital expenditures to expand Zyn capacity in the U.S. [9]. Valuation - The stock trades at a forward price-to-earnings (P/E) ratio of just over 20 times for 2025, with a PEG ratio under 0.4, indicating it is undervalued [13]. - The company offers a robust quarterly dividend of $1.35, translating to a forward dividend yield of 3.7% [10][14].

Core Insights - Philip Morris International reported strong financial results for its fourth quarter, leading to an 11% surge in its share price and reaching a new all-time high [1] Financial Performance - The company exceeded analyst expectations regarding its earnings per share (EPS) [1]

Core Insights - Philip Morris International Inc. (PM) shares increased by 9.4% in pre-market trading following strong fourth-quarter 2024 results, with both revenue and earnings surpassing expectations [1][2][3] Financial Performance - Adjusted earnings per share (EPS) for the fourth quarter reached $1.55, a 14% increase year over year, exceeding the Zacks Consensus Estimate of $1.51 [2] - Net revenues totaled $9,706 million, reflecting a 7.3% increase on a reported and organic basis, surpassing the Zacks Consensus Estimate of $9,362.4 million [3] - The adjusted operating income rose 15.3% to $3,519 million, driven by improved pricing and volume/mix, despite increased marketing and administrative costs [6] Product Performance - Revenues from combustible products grew by 6% due to high single-digit pricing and strong industry volumes [4] - Smoke-free business revenues increased by 9.2%, accounting for 40% of total revenues, with significant contributions from IQOS and ZYN [5] - Total shipment volumes rose by 2.3% to 193.1 billion units in the fourth quarter [5] Regional Performance - European net revenues grew 5.5% organically to $4,056 million, with shipment volumes remaining flat at 53.6 billion units [7] - In the SSEA, CIS & MEA regions, net revenues increased 6.6% to $2,868 million, with a 4.1% rise in shipment volumes [8] - The Americas saw a 21% organic revenue surge to $1,261 million, although shipment volumes dipped by 2% [9] Future Outlook - For 2025, adjusted EPS is projected to be in the range of $7.04-$7.17, indicating a growth of 7.2-9.1% [13] - PM anticipates net revenues to increase by 6-8% on an organic basis and operating income to rise by 10.5-12.5% [15] - The company expects operating cash flow of around $11 billion in 2025, with capital expenditures estimated at nearly $1.5 billion [15]

Financial Data and Key Metrics Changes - The company reported an organic net revenue growth of 9.8% and adjusted diluted EPS growth of 15.6% in currency neutral terms, reflecting strong performance despite currency headwinds [19][20][24] - Adjusted diluted EPS grew by 9.3% in dollar terms, achieving record operating cash flow of $12.2 billion, significantly above forecasts [20][21] - The total smoke-free net revenues reached almost $15 billion in 2024, accounting for 40% of total net revenues in Q4 [12][18] Business Line Data and Key Metrics Changes - The smoke-free business saw a 17% net revenue growth and a 23% gross profit growth, reaching close to $10 billion in gross profit [25] - The combustible business experienced a 6% net revenue growth and a 7% gross profit growth, contributing positively despite significant input cost headwinds [25][26] - IQOS shipments grew by 13% in adjusted IMS, with total smoke-free volume growth of 13.5% [28][34] Market Data and Key Metrics Changes - In the US, ZYN's growth was notable, with a 51% increase in shipment volumes, while international nicotine pouch shipments grew by 75% [9][57] - The company expanded its smoke-free product presence to 37 markets, with a significant increase in adult users [12][57] - The combustible market showed a 0.6% growth, primarily driven by markets where smoke-free products are not permitted [30] Company Strategy and Development Direction - The company aims to continue its transformation towards smoke-free products, with a focus on brand building and innovation [11][15] - The management emphasized the importance of regulatory support for smoke-free products and the need for continued education on tobacco harm reduction [15][54] - The company is confident in achieving its 2025 growth targets, expecting strong growth in smoke-free products [61][80] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing transformation and the potential for sustainable growth and returns in 2025 and beyond [11][24] - The company acknowledged challenges from regulatory environments but remains committed to driving growth through innovation and market expansion [15][54] - The outlook for 2025 includes expectations for continued strong growth across all categories, particularly in smoke-free products [61][80] Other Important Information - The company achieved significant cost efficiencies, delivering over $750 million in gross cost savings for the year [33] - The FDA's recent authorization for nicotine pouches was highlighted as a significant milestone for the industry [54] - The company plans to invest in its successful smoke-free product lines while returning cash to shareholders through dividends [80] Q&A Session Summary Question: Can you discuss the composition of growth in 2025 and any progress in new markets? - Management indicated that growth will primarily be organic, with strong performance expected in Japan and parts of Europe, despite challenges in Italy and the Czech Republic due to regulatory issues [87][89] Question: What are the key drivers behind margin improvements? - Management highlighted pricing contributions, positive mix effects from smoke-free products, and easing cost headwinds as key drivers for margin expansion [92][95] Question: How does the company plan to manage retail prices amid supply constraints? - Management acknowledged that managing retail prices is challenging during supply shortages but expects normalization as supply improves [132][135]