Core Insights - The tobacco sector presents two main investment options: Altria Group, Inc. and Philip Morris International Inc., each with distinct market strategies and growth trajectories towards a smoke-free future [1][2] Altria Group, Inc. - Altria focuses on the U.S. market, leveraging its Marlboro brand while expanding into alternatives like NJOY and oral nicotine pouches [2] - The company achieved a 10.8% net price realization in smokeable products in Q1 2025, contributing to a 2.7% increase in adjusted operating income [3][9] - Altria's oral nicotine pouch brand, on!, saw an 18% increase in shipments, capturing 8.8% of the oral tobacco category and 17.9% of the nicotine pouch segment [4][9] - Despite setbacks in the e-vapor category, Altria is refining its product pipeline and advocating for regulatory reforms to combat the rise of illicit disposable e-vapor products, which account for over 60% of the U.S. market [5] - The cigarette industry faces challenges, with shipment volumes declining due to macroeconomic pressures and the growth of illegal e-vapor products, impacting low-income smokers [6] Philip Morris International Inc. - Philip Morris is advancing its transformation strategy with a strong smoke-free portfolio, including IQOS, ZYN, and VEEV, and has approximately 41.5 million adult users by Q2 2025 [7][9] - IQOS is the primary driver of growth, with accelerated adoption in key markets supported by commercial initiatives and product innovations [8][10] - The company offers smoke-free products in 97 markets, with nearly half providing multiple product categories, enhancing its global reach [10] - Philip Morris faces challenges such as currency volatility and increasing regulatory risks, particularly regarding nicotine pouch marketing [11] Financial Performance and Valuation - Altria's forward P/E ratio is 10.96, appealing to income-focused investors, while Philip Morris has a higher multiple of 20.12, reflecting its global presence and momentum in smoke-free products [15] - Over the past month, Altria gained 2.1%, while Philip Morris dropped 11.6%, underperforming the S&P 500's 3.4% rise [14] Conclusion - Philip Morris is better positioned for long-term growth with its aggressive pivot towards a smoke-free future and strong global traction, while Altria's focus on domestic stability and pricing strength supports income-focused investors but faces more headwinds [16]

Core Viewpoint - Philip Morris International Inc. is expected to report growth in both revenue and earnings for the second quarter of 2025, with earnings anticipated to be released on July 22, before market opening [1]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for revenues is approximately $10.3 billion, reflecting an 8.3% increase from the same quarter last year [2]. - The consensus estimate for quarterly earnings has risen to $1.85 per share, indicating a 16.4% increase compared to the previous year [2]. Earnings Performance and Predictions - Philip Morris has a trailing four-quarter average earnings surprise of 3.6%, with the last quarter's earnings exceeding the Zacks Consensus Estimate by 5% [3]. - The company has an Earnings ESP of -0.04% and a Zacks Rank of 2 (Buy) [4]. Factors Influencing Q2 Earnings - Strong pricing strategies have been a significant driver of revenue and operating income growth, as smokers tend to accept price increases due to the addictive nature of cigarettes [5]. - Smoke-free products contributed to 44% of the gross profit in Q1 2025, highlighting the success of the IQOS ILUMA device and other innovations like ZYN nicotine pouches and VEEV ONE e-vapor [6]. Smoke-Free Product Growth - The Zacks Consensus Estimate for total smoke-free product revenues for Q1 is $4,225.9 million, up from $3,530 million in the previous year [7]. - Management anticipates a 10% growth in IQOS HTU adjusted IMS for Q2, with ZYN shipments expected to maintain levels from Q1 [8]. Earnings Forecast - The company forecasts adjusted earnings between $1.80 and $1.85 for Q2, including a favorable currency impact of 6 cents per share [9][11]. Stock Performance - Philip Morris shares have increased by 9.7% over the past three months, underperforming the Zacks industry growth of 10.2% but lagging behind the S&P 500's 19.5% increase [12]. - Compared to major tobacco players, Philip Morris outperformed Altria but was outpaced by Turning Point Brands and British American Tobacco [13]. Valuation Analysis - Philip Morris is trading at a premium with a forward 12-month price-to-earnings ratio of 22.39X, above the industry average of 15.21X [15]. - Despite the premium valuation, the company's growth profile and strategic transformation make it an attractive option for investors [16].

Core Insights - Altria Group, Inc. is progressing towards a smoke-free future, with its oral nicotine pouch brand on! being a significant growth driver as consumer preferences shift towards reduced-risk products [1][5] Group 1: Product Performance - In Q1 2025, on! shipment volume increased by 18% year over year, exceeding 39 million cans, and its retail market share in the oral tobacco category rose to 8.8%, a 1.8 share point increase [2][10] - Within the nicotine pouch segment, on! achieved a market share of 17.9%, gaining 0.5 points, indicating strong brand equity and consumer loyalty despite higher retail pricing [2][10] Group 2: Financial Performance - Altria's Oral Tobacco Products segment generated revenues of $654 million in Q1 2025, reflecting a 0.5% year-over-year increase, primarily driven by pricing strength [3][10] - The company's forward price-to-earnings ratio stands at 10.87X, which is below the industry average of 15.49X [12] Group 3: Strategic Initiatives - Altria has initiated the "Optimize & Accelerate" program, aiming for at least $600 million in cost savings over five years, focusing on enhancing efficiency and reinvesting in smoke-free innovations [4] - The company is positioning itself to lead in the smoke-free nicotine market, with on! becoming a cornerstone of its growth strategy [5] Group 4: Competitive Landscape - Key competitors in the smoke-free category include Philip Morris International and British American Tobacco, both of which are also shifting towards reduced-risk products [6][7][8] - Philip Morris reported that smoke-free products contributed 44% of its gross profit in Q1 2025, with significant growth in ZYN and VEEV shipments [7] - British American Tobacco aims to reach 50 million consumers by 2030, with its smokeless user base at 29.1 million in 2024 [8] Group 5: Earnings Estimates - The Zacks Consensus Estimate for Altria's 2025 earnings indicates a year-over-year growth of 4.5%, with 2026 estimates suggesting a 3.5% increase [13]