An updated edition of the Sept. 26, 2025, article.Investing in the stock market often brings to mind themes of growth, innovation, and long-term value creation, but beneath the surface lies a niche segment that has historically delivered outsized returns: sin stocks. These are companies operating in industries often considered socially or morally controversial, including alcohol, tobacco, gambling, weapons manufacturing, and, at times, cannabis. Despite their reputational baggage, sin stocks tend to benefit ...

Core Insights - The London Company reported a 6.0% gross (5.8% net) appreciation in its portfolio for Q3 2025, outperforming the Russell 1000 Value Index which increased by 5.3% [1] - The performance was driven by a favorable stock selection, although sector exposure presented some headwinds [1] Company Overview: Philip Morris International Inc. (NYSE:PM) - Philip Morris International Inc. is a tobacco company that offers both traditional cigarettes and smoke-free products [2] - The stock experienced a one-month return of -4.90% but gained 17.84% over the last 52 weeks, closing at $147.66 per share with a market capitalization of $229.853 billion on November 4, 2025 [2] - The company’s smoke-free offerings, particularly IQOS and ZYN, are showing growth, with higher margins on these products [3] Investment Sentiment - Philip Morris International Inc. was held by 111 hedge fund portfolios at the end of Q2 2025, an increase from 104 in the previous quarter [4] - Despite its potential, the company is not considered among the top 30 most popular stocks among hedge funds, with some analysts suggesting that certain AI stocks may offer greater upside potential [4]

Core Viewpoint - Philip Morris International Inc. is recognized for its significant upside potential, supported by a strong performance in its smoke-free product portfolio and positive earnings growth [1][2]. Financial Performance - In the third quarter, Philip Morris reported a 13.2% increase in earnings per share (EPS), with diluted EPS rising 17.3% to $2.24 [2]. - The company anticipates full-year EPS growth between 13.5% and 15.1%, projecting EPS to range from $7.39 to $7.49 [3]. - Organic revenue growth is expected to be between 6% and 8% for the year [3]. Product Strategy - Philip Morris is strategically shifting from traditional cigarettes to a diverse range of smoke-free alternatives, including heated tobacco products (e.g., IQOS), e-vapor, and oral nicotine pouches (e.g., ZYN) [4]. - The company's smoke-free portfolio is outpacing industry growth, contributing to positive total volumes and top-line growth [2][3]. Analyst Ratings - Stifel has reiterated a 'Buy' rating on Philip Morris, setting a price target of $180, reflecting confidence in the company's growth trajectory [1][2].

Core Insights - Altria Group, Inc. and Philip Morris International Inc. are navigating a transforming tobacco market with distinct strategies, focusing on smoke-free alternatives and maintaining strong brand presence [1][2] Altria Group, Inc. - Altria's pricing power is a key factor in its financial resilience, with a 10% net price realization in smokeable products leading to a 4.2% increase in adjusted operating companies income (OCI) in Q2 2025 [6] - The oral tobacco segment, particularly the on! nicotine pouch brand, saw shipments rise 26.5% year over year, contributing to a 10.9% increase in adjusted OCI [7] - Adjusted earnings per share (EPS) increased 8.3% year over year to $1.44 in Q2 2025, with revenues net of excise taxes at $5.29 billion [8] - Marlboro maintains a 59.5% share in the premium category, showcasing Altria's strong market position and ability to adapt to a smoke-free future [10] Philip Morris International Inc. - Philip Morris's growth is driven by smoke-free products, which accounted for 41% of total net revenues and 42% of gross profit in Q3 2025 [11] - Shipments of IQOS, ZYN, and VEEV showed significant growth, with IQOS shipments up 15.5% to 41 billion units, maintaining a 76% global share in heated tobacco [12] - Adjusted operating income rose 12.4% to $4.7 billion, with adjusted EPS increasing 17.3% to $2.24, supported by strong performance in smoke-free products [13] - Despite a 3.2% decline in cigarette shipment volumes, Philip Morris managed a 4.3% increase in net revenues through pricing strategies [14] Market Performance - Altria's stock has gained 25.3% over the past year, outperforming Philip Morris's 13.1% increase and the broader S&P 500's 20.6% rise [21] - Altria is trading at a forward P/E ratio of 11.41, while Philip Morris's forward P/E ratio stands at 18.24 [20] Investment Outlook - Altria is positioned as a better investment for income-focused investors due to its attractive valuation, robust pricing power, and growing smoke-free momentum, while Philip Morris offers stronger global growth potential [22]

Core Insights - Philip Morris International Inc. (NYSE:PM) is recognized as a strong investment opportunity, particularly for income investors due to its consistent dividend growth and solid financial performance [2][6]. Financial Performance - Stifel reaffirmed a Buy rating on Philip Morris after the company reported strong Q3 results, exceeding expectations in organic sales, profit margins, and earnings per share (EPS) growth [2]. - The company raised the lower end of its 2025 EPS forecast, aided by a reduced tax rate and lower interest expenses, but lowered its operating profit guidance to 10%-11.5% from 11%-12.5% due to increased investments in the U.S. market, particularly for its ZYN nicotine pouch brand [3]. - For Q4, Philip Morris anticipates low to mid-single-digit operating profit growth, slightly below earlier projections, primarily due to inventory challenges with its IQOS and ZYN product lines, estimating a 20-30 million can inventory headwind for ZYN [4]. Stock Performance and Market Sentiment - Despite a nearly 18% decline from its June peak, Stifel views this drop as a buying opportunity, asserting that the expected Q4 softness does not reflect the company's underlying earnings momentum [5]. - The company is projected to achieve EPS growth consistent with its medium-term target range of 9-11% heading into 2026 [5]. Dividend Information - Philip Morris has a strong track record of rewarding shareholders with growing dividends for 16 consecutive years, currently offering a quarterly dividend of $1.47 per share and a dividend yield of 3.87% as of October 21 [6].

Financial Data and Key Metrics Changes - The company reported a record adjusted diluted EPS of $2.24, reflecting a 17% growth year-over-year [3][8] - Adjusted operating income grew by 7.5% organically and 12.4% in dollar terms to $4.7 billion, with a margin expansion of 120 basis points [7][11] - Organic net revenue growth was 7.5%, or approximately 9% excluding the Indonesia technical impact, driven by strong smoke-free performance [8][10] Business Line Data and Key Metrics Changes - The global smoke-free business achieved over $3 billion in quarterly gross profit for the first time, with a 16.6% volume growth in smoke-free products [3][4] - IQOS saw a 9% growth in HTU adjusted in-market sales and a 15.5% growth in ET tobacco unit shipments [4][9] - ZYN can shipments grew by 36% globally, with a 39% off-take growth in the U.S. [16][22] Market Data and Key Metrics Changes - The smoke-free product portfolio outpaced the industry with over 12% estimated IMS volume growth year-to-date compared to less than 10% for the industry [14][15] - In Europe, markets like Italy, Greece, and Spain showed excellent growth across all smoke-free categories [18][20] - The U.S. nicotine pouch category has been growing at more than 40% over the last 18 months, with ZYN capturing a significant market share [25][27] Company Strategy and Development Direction - The company is focused on geographic expansion, with smoke-free products now available in 100 markets, and is investing in multi-category strategies [4][14] - Continued investment in marketing and brand equity for ZYN and IQOS is planned, with expectations for sustained growth in the U.S. market [14][63] - The company aims to maintain a premium positioning for ZYN while expanding its market presence [24][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit adjusted operating income and EPS growth for the year, despite anticipated challenges in Q4 [30][32] - The company expects a normalization in promotional activities for ZYN, which may impact short-term performance but is seen as necessary for long-term growth [41][42] - Management highlighted the resilience of the combustible business and the ongoing strong performance of smoke-free products [35][30] Other Important Information - The company raised its dividend for the 18th consecutive year to $5.88 per share, reflecting strong year-to-date performance [36] - A planned $2 billion cost-saving objective over 2024-2026 is on track, with ongoing cost efficiency measures [14][34] Q&A Session Summary Question: Clarification on ZYN's growth and October performance - Management confirmed ZYN's market leadership with over 60% share and noted that promotional activities are returning to normal levels, which may impact short-term growth [39][41] Question: Insights on IQOS shipments versus IMS - Management acknowledged a discrepancy between HTU shipment growth and IMS growth, expecting alignment in Q4 while maintaining strong performance in the long term [45] Question: Investment levels and future expectations for ZYN - Management clarified that the $100 million investment in Q3 was a one-off related to promotional activities, with expectations for ZYN to maintain best-in-class margins moving forward [51][52]

Financial Data and Key Metrics Changes - The company reported a record adjusted diluted EPS of $2.24, reflecting a growth of +17% year-over-year [3][8] - Adjusted operating income grew by +7.5% organically and +12.4% in dollar terms to $4.7 billion, with an adjusted operating income margin of over 43% [7][8] - Organic net revenue growth was +7.5%, or around +9% excluding the Indonesia technical impact, driven by strong smoke-free performance and robust pricing [8][10] Business Line Data and Key Metrics Changes - The global smoke-free business achieved over $3 billion in quarterly gross profit for the first time, with smoke-free net revenues growing organically by +13.9% [3][10] - IQOS saw a +9% adjusted in-market sales growth and +15.5% growth in tobacco unit shipments, reflecting strong momentum in Europe, Japan, and global markets [4][9] - ZYN can shipments grew by +36% globally, with a notable +39% off-take growth in the U.S. [16][20] Market Data and Key Metrics Changes - The company’s smoke-free products are now commercialized in 100 markets, with a significant presence in the U.S., Europe, and Japan [4][15] - The overall smoke-free category is estimated to have grown by over +12% year-to-date, compared to less than 10% for the industry [14][15] - In Japan, IQOS continues to grow robustly, with Q3 adjusted IMS growth of +6% [19] Company Strategy and Development Direction - The company is focused on geographic expansion and deploying a multi-category strategy to enhance growth, with all smoke-free brands now commercialized together in 25 markets [4][14] - Continued investment in marketing and brand equity for ZYN and IQOS is planned, with expectations for sustained growth in the nicotine pouch category [14][25] - The company aims to maintain a premium positioning for ZYN while expanding its market share in the nicotine pouch category [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving another year of double-digit adjusted operating income and EPS growth, despite anticipated challenges in Q4 [28][30] - The company expects a slower quarter in Q4 due to inventory adjustments and a higher tax rate, but maintains a positive long-term growth outlook [31][32] - Management highlighted the resilience of the combustible business and the strong performance of the smoke-free portfolio as key drivers for future growth [34] Other Important Information - The company raised its dividend by +8.9% to $5.88 per share, marking the 18th consecutive year of dividend increases [35] - A planned $2 billion cost-saving objective over 2024-2026 is on track, supported by ongoing cost efficiency measures [14][33] Q&A Session Summary Question: Clarification on ZYN's growth and October performance - Management confirmed ZYN's leadership in the nicotine pouch market and noted that promotional activities are returning to normal levels, which may impact growth rates [38][41] Question: Insights on IQOS shipments versus IMS - Management acknowledged a discrepancy between HTU shipments and IMS growth, expecting alignment in Q4 while maintaining a positive outlook for IQOS performance [45] Question: Future investment levels in the U.S. market - Management clarified that the recent $100 million investment was a one-off related to promotional activities, with ongoing investments planned for ZYN and IQOS [51][60] Question: Impact of promotional strategies on new consumer acquisition - Management indicated that the recent free can promotion successfully attracted new consumers, although specific metrics on new customer acquisition were not disclosed [66][68]

Financial Data and Key Metrics Changes - The company reported a record adjusted diluted EPS of $2.24, reflecting a 17% growth year-over-year [3][7] - Adjusted operating income grew by 12.4% in dollar terms to $4.7 billion, with an adjusted operating income margin of over 43%, the highest in almost four years [3][6] - Organic net revenue growth was 7.5%, or approximately 9% excluding the Indonesia technical impact, driven by strong smoke-free performance and robust pricing [7][9] Business Line Data and Key Metrics Changes - The global smoke-free business achieved over $3 billion in quarterly gross profit for the first time, with smoke-free volume growth of 16.6% in Q3 [3][8] - IQOS saw a 9% growth in HTU adjusted in-market sales, while ZYN can shipments grew by 36% globally [4][15] - Combustibles delivered a good Q3 with better-than-expected volumes in Turkey and Egypt, despite a 3.2% decline in cigarette volumes [5][10] Market Data and Key Metrics Changes - The company’s smoke-free products are now commercialized in 100 markets, with a significant presence in Europe, Japan, and the U.S. [4][14] - In the U.S., ZYN captured the majority of Q3 category growth in both volume and value terms, with a 39% off-take growth [19][20] - International can volumes increased by 27%, with over 100% growth excluding Nordic countries [5][16] Company Strategy and Development Direction - The company is focused on geographic expansion and deploying a multi-category strategy to enhance growth, with all smoke-free brands now commercialized together in 25 markets [4][14] - Continued investment in marketing and brand equity for ZYN and IQOS is planned, with a target of $2 billion in cost savings over 2024-2026 [13][24] - The company anticipates maintaining a premium positioning for ZYN while expanding its market share in the nicotine pouch category [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit adjusted operating income and EPS growth in currency-neutral terms for the year [6][29] - The company expects a slower quarter in Q4 due to inventory adjustments and a higher tax rate, but maintains a positive outlook for continued growth in smoke-free products [30][54] - The anticipated adjusted effective tax rate for the year is around 22%, with expectations of strong performance from the smoke-free business [30][31] Other Important Information - The company raised its dividend for the 18th consecutive year to $5.88 per share, reflecting strong year-to-date performance and confidence in future growth [34] - The company is on track to exceed its 2024-2026 CAGR targets, indicating a strong growth profile within consumer packaged goods [32][33] Q&A Session Summary Question: Clarification on ZYN's growth and October performance - Management confirmed ZYN's leadership in the nicotine pouch market with over 60% market share and noted that the category has been growing between 30% and 40% [36][37] - The special promotion in Q3 was aimed at creating awareness and capturing market share, with a normalization of promotional activity expected moving forward [38][39] Question: Investment levels and margin structure for ZYN - The $100 million investment in Q3 was a one-off related to the special promotion, and management expects ZYN to maintain best-in-class margins despite increased promotional activity [48][50] - Future investments will continue to support both ZYN and IQOS, with a focus on building commercial presence and marketing capabilities in the U.S. [56][58] Question: Drivers behind full-year dollar EPS growth guidance raise - Management indicated that the EPS growth is driven by strong operating income growth, improved tax rates, and favorable interest costs [59][60] - The company remains optimistic about achieving strong growth in Q4, despite some technical impacts on inventory and pricing [53][54]

Financial Data and Key Metrics Changes - The company reported a record adjusted diluted earnings per share (EPS) of $2.24, reflecting a growth of 17% year-over-year [6][12][48] - Adjusted operating income (OI) grew by 12.4% in dollar terms to $4.7 billion, with an adjusted OI margin expansion of 120 basis points to 43.1% [11][20][45] - Organic net revenue growth was 7.5%, driven by strong smoke-free performance and robust pricing [12][14][44] Business Line Data and Key Metrics Changes - The smoke-free business achieved over $3 billion in quarterly gross profit for the first time, with a gross margin of 70% [6][17][19] - IQOS saw a 9% growth in heated tobacco unit (HTU) adjusted in-market sales, with HTU shipments growing by 15.5% [7][13][24] - ZYN can shipments grew by 36% globally, with a strong presence in 47 markets [25][31] Market Data and Key Metrics Changes - The company’s smoke-free products are now commercialized in 100 markets, with a significant launch in Taiwan [6][7] - In the U.S., ZYN captured the majority of category growth in both volume and value terms, holding over 60% market share [31][38] - The nicotine pouch category in the U.S. has been growing at over 40% over the last 18 months [37][38] Company Strategy and Development Direction - The company is focused on geographic expansion and multi-category strategy to enhance growth, with all smoke-free brands now commercialized together in 25 markets [6][7][22] - Continued investment in marketing and brand equity for ZYN and IQOS is planned, with expectations for sustained growth in the U.S. market [21][78] - The company aims to maintain best-in-class margins for ZYN while normalizing promotional activities [67][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit growth in adjusted operating income and EPS for the year, despite anticipated slower growth in Q4 [43][45][46] - The company expects a continued strong performance from its smoke-free business, with an acceleration in IQOS sales growth [46][70] - Management acknowledged the impact of increased promotional activities and a higher tax rate on Q4 performance but remains optimistic about long-term growth [72][74] Other Important Information - The company raised its dividend by 8.9% to $5.88 per share, marking the largest increase since 2013 [49] - A one-off investment of $100 million was made in Q3 for promotional activities, which is not expected to recur [60][66] Q&A Session Summary Question: Clarification on ZYN's growth and October performance - Management confirmed ZYN's market leadership with over 60% share and noted that promotional activities were normalized in Q3, impacting growth dynamics [53][54][56] Question: Details on ZYN's margin structure and investment levels - Management clarified that the $100 million investment was a one-off related to promotional activities and that they expect to maintain best-in-class margins moving forward [66][67] Question: Drivers behind full-year dollar EPS growth guidance - Management indicated that strong operating income growth and favorable tax and interest cost dynamics contributed to the raised EPS guidance [81][82]

Financial Performance - Q3 2025 adjusted diluted EPS reached $2.24[12], while YTD adjusted diluted EPS reached $5.83[14] - Q3 2025 net revenues totaled $10.8 billion[12], and YTD net revenues reached $30.3 billion[14] - The company is raising its adjusted diluted EPS forecast to $7.46-$7.56, including a $0.10 favorable currency impact[75] - The company is raising its operating cash flow forecast to over $11.5 billion[75] Smoke-Free Products (SFP) Growth - SFP expansion continues, now in 100 markets[5] - Q3 2025 total shipment volume was 204.9 billion units, with smoke-free products accounting for 46.9 billion units, a 16.6% increase vs PY[20] - YTD September 2025 total shipment volume was 592.7 billion units, with smoke-free products accounting for 134.8 billion units, a 14.3% increase vs PY[20] - VEEV volumes increased by 91% vs PY in Q3 2025[45] Regional Performance - Europe Q3 2025 IQOS, ZYN & VEEV shipment growth was +13%[48] - In Japan, PMI HTU adjusted share of market in Q3 2025 was 31.7%, a +1.8 percentage point increase vs PY[50] - In the U S, ZYN Nielsen retail value share reached 66.8% in Q3 2025[54] ZYN Performance - Global ZYN markets increased by 36% vs PY[43] - U S ZYN volumes increased by 37% vs PY[43] - International Nicotine Pouch Volumes increased by 27% vs PY[43]