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MO vs. PM: Which Tobacco Giant is Better Positioned for the Future?
ZACKS· 2025-09-26 16:11
Core Insights - Altria Group, Inc. and Philip Morris International Inc. are leading companies in the global tobacco industry, with market capitalizations of approximately $109.5 billion and $255.3 billion respectively [1][2] - Both companies are heavily investing in next-generation products to adapt to declining cigarette volumes and increasing demand for smoke-free alternatives [3] Altria Group, Inc. (MO) - Altria's strong pricing power has allowed it to offset declines in cigarette volumes, with a net price realization of 10% in the smokeable products segment leading to adjusted operating companies income (OCI) growth of 4.2% in Q2 2025 [4] - The oral tobacco segment saw a 10.9% increase in adjusted OCI, with segment margins expanding 310 basis points to 68.7%, driven by the success of the on! nicotine pouch brand [5] - Adjusted earnings per share increased by 8.3% year over year to $1.44, supported by strong adjusted OCI growth and share repurchases, with Marlboro holding a 59.5% share in the premium category [6] - Domestic cigarette volumes fell 10.2% in Q2 2025, indicating ongoing industry declines and competitive pressure from flavored disposable e-vapor products [7] Philip Morris International Inc. (PM) - Philip Morris' smoke-free products accounted for 41% of total net revenues in Q2 2025, reflecting a 15.2% year-over-year increase, with IQOS, ZYN, and VEEV driving this growth [11] - Combustible net revenues advanced 2.1% in the quarter, supported by strong pricing power, while gross profit increased by 5% [12] - The company achieved over $500 million in gross cost savings in the first half of 2025, contributing to meaningful margin expansion [13] - Traditional cigarette volumes fell 1.5% year over year to 155.2 billion units, with management projecting a full-year decline of 2% [14] Financial Performance Comparison - The Zacks Consensus Estimate for Altria's 2025 EPS is $5.39, indicating a year-over-year increase of 5.3%, while Philip Morris' estimate remains at $7.50, suggesting growth of 14.2% [15] - Over the past year, Altria stock gained 27.7%, underperforming Philip Morris, which increased by 36% [16] Investment Outlook - Philip Morris is viewed as the stronger growth story due to its transition to smoke-free products and efficiency initiatives, while Altria offers stability and consistent performance [17]
Altria Delivers 7.2% EPS Growth in 1H25 Despite Sales Headwinds
ZACKS· 2025-09-22 15:00
Core Insights - Altria Group, Inc. achieved 7.2% adjusted earnings per share (EPS) growth in the first half of 2025, reaching $2.67 compared to $2.49 in the same period last year, driven by higher adjusted operating companies income, fewer shares outstanding, and a lower adjusted tax rate [1][8] - The company's net revenues decreased by 3.6% year over year to $11.4 billion, primarily due to challenges in the smokeable products segment, but adjusted operating companies income for smokeable products increased by 3.5% [2][8] - Altria repurchased 10.4 million shares in the first half, contributing to EPS growth, and returned over $4 billion to shareholders through buybacks and dividends [3][8] Financial Performance - Adjusted EPS for the second quarter was $1.44, an increase of 8.3% from $1.33 in the second quarter of 2024 [1][8] - Smokeable products' adjusted operating companies income margins improved by 3.5 percentage points to 64.5%, supported by elevated pricing and cost efficiencies [2][8] - The company maintains a forward price-to-earnings ratio of 11.6X, lower than the industry's average of 14.95X [9] Comparative Analysis - Philip Morris International Inc. reported a 20.1% year-over-year increase in adjusted EPS to $1.91, benefiting from strong pricing in heated tobacco and higher volumes in smoke-free products [5] - Turning Point Brands, Inc. saw adjusted EPS rise to 98 cents, up from 89 cents last year, driven by a significant increase in Modern Oral sales [6] Future Outlook - The Zacks Consensus Estimate for Altria's earnings implies year-over-year growth of 5.3% for 2025 and 2.9% for 2026 [10]
PMI(PM) - 2025 FY - Earnings Call Transcript
2025-09-02 16:15
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]
Altria vs. Philip Morris: Which Stock Smokes Out Better Returns?
ZACKS· 2025-08-25 15:36
Industry Overview - The tobacco industry is undergoing significant transformation due to declining cigarette volumes, rising health awareness, and evolving regulatory frameworks [2] - Companies are competing not only on brand strength but also on their ability to innovate with alternatives like heated tobacco and nicotine pouches [2] Altria Group, Inc. (MO) - Altria's adjusted earnings per share (EPS) rose 8.3% year over year to $1.44 in Q2 2025, supported by higher pricing, cost efficiencies, and share repurchases [5] - Revenues net of excise taxes were $5.29 billion, indicating portfolio stability [5] - Management raised the lower end of its 2025 adjusted EPS guidance to $5.35-$5.45, reflecting a growth rate of 3% to 5% [5] - Shipments of the on! nicotine pouch brand increased by 26.5% to 52.1 million cans, capturing an 8.7% retail share of the U.S. oral tobacco market [6] - The smokeable products segment showed resilience with adjusted operating income rising 4.2% and margins expanding 290 basis points to 64.5% [7] - Marlboro maintained a 59.5% share in the premium category, highlighting brand strength [7] Philip Morris International Inc. (PM) - Philip Morris' smoke-free products accounted for 41% of total net revenues in Q2 2025, growing 15.2% year over year [10] - The traditional cigarette business remains resilient, with combustible net revenues growing 2.1% in Q2, driven by price increases [11] - Management lifted its full-year adjusted EPS guidance to $7.43-$7.56, indicating 13-15% growth [13] - The company achieved over $500 million in gross cost savings in H1 2025, aiming for $2 billion in efficiencies by 2026 [12] - Cigarette shipment volumes declined 1.5% year over year to 155.2 billion units in Q2, with a forecasted 2% decrease for the full year [14] Comparative Analysis - The Zacks Consensus Estimate for Altria's 2025 EPS is $5.39, implying a year-over-year increase of 5.3% [15] - Philip Morris' consensus estimate remains at $7.50, indicating growth of 14.2% for 2025 [15] - Altria stock advanced 15.2% in the past month, outperforming Philip Morris' 8.9% gain [16] - Altria trades at a forward P/E multiple of 12.29, while Philip Morris carries a premium multiple of 21.25 [16] Investment Outlook - Philip Morris is viewed as the stronger long-term investment due to its global scale and leadership in smoke-free innovation [19] - Altria remains attractive for income-oriented investors but is seen as less favorable for sustained growth compared to Philip Morris [19]
PM Stock Trades at Premium Value: Should You Buy, Hold or Sell?
ZACKS· 2025-08-20 16:25
Core Viewpoint - Philip Morris International Inc. is currently trading at a forward P/E multiple of 20.93X, which is significantly higher than the Zacks Tobacco industry average of 15.31X and the broader Consumer Staples sector average of 17.14X, raising questions about whether the growth justifies this premium [1][2][4]. Valuation and Performance - Philip Morris trades at a forward P/E of 20.93X, above industry and sector averages, indicating a premium valuation [7]. - Recent performance shows PM shares fell 6.4% over the past month, contrasting with gains in the Zacks Tobacco industry and the S&P 500, which advanced 0.6% and 2.5% respectively [5][4]. - Major competitors like Altria and British American Tobacco have lower forward P/E ratios of 12.12X and 11.88X, while Turning Point Brands trades at a higher multiple of 24.02X [4]. Revenue and Growth - Smoke-free products accounted for 41% of revenues in Q2, growing 15.2% year-over-year, driven by IQOS, ZYN, and VEEV [7][18]. - Despite volume declines in traditional cigarettes, PM's combustible net revenues grew 2.1% in Q2, supported by price increases [19]. - Management projects a 2% full-year decline in cigarette volume, with a sharper 3-4% drop expected in the second half [15]. Cost Efficiency and Earnings Guidance - The company achieved over $500 million in gross cost savings in the first half of the year and aims for $2 billion in efficiencies between 2024 and 2026 [20]. - Adjusted earnings per share for the last quarter were reported at $1.91, up 20% year-over-year, although impacted by currency volatility [17]. - Management raised its full-year adjusted EPS guidance to $7.43-$7.56, indicating 13-15% growth [21]. Market Sentiment and Estimates - The Zacks Consensus Estimate for earnings per share has seen upward revisions, with current estimates at $7.50 for the current year and $8.39 for the next year, reflecting year-over-year growth rates of 14.2% and 11.9% respectively [22]. - Despite challenges, the raised EPS outlook and upward estimate revisions indicate confidence in sustained earnings growth [24].