Can Philip Morris Rely on Pricing to Drive 2025 EPS Growth?

Core Insights - Philip Morris International (PM) relies heavily on pricing as a primary driver for earnings, achieving a 12.7% year-over-year increase in adjusted earnings per share (EPS) to $1.69 in Q1 2025, with pricing contributing 6 percentage points to organic revenue growth of 10.2% [1][7] - The company has raised its full-year EPS forecast to a range of $7.36-$7.49, raising questions about the sustainability of this momentum solely through pricing [1] Pricing Strategy and Market Performance - Continued pricing strength was noted in key markets such as Turkey, Poland, and Germany, although gross pricing is expected to moderate for the remainder of the year [2] - In the smoke-free category, gross margins expanded by 670 basis points, exceeding 70%, with ZYN shipments increasing by 63% in the quarter, highlighting the segment's strategic importance [2][3] Competitive Landscape - Altria Group (MO) reported a 10.8% increase in net price realization for combustibles, but faces challenges with consumer pressure leading to a shift towards discount brands [4] - Turning Point Brands (TPB) experienced significant growth in its modern oral segment, but faced margin pressure and acknowledged the need for further investment to enhance profitability [5] Valuation and Earnings Estimates - Philip Morris shares have increased by 4.9% over the past month, slightly underperforming the industry growth of 5.1% [6] - The forward price-to-earnings ratio for PM is 23.19X, compared to the industry average of 15.64X, indicating a premium valuation [8] - The Zacks Consensus Estimate for PM's 2025 earnings suggests a year-over-year growth of 13.7%, with an 11.7% increase projected for 2026 [9]