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]

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 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]

Core Insights - Philip Morris International Inc. (PM) is expected to report growth in both revenue and earnings for the third quarter of 2025, with revenue estimated at $10.7 billion, reflecting an 8% increase year-over-year [1][10] - The earnings consensus has slightly decreased to $2.10 per share, indicating a nearly 10% rise compared to the previous year's quarter [2][10] Revenue and Earnings Expectations - The revenue estimate of $10.7 billion represents an 8% increase from the prior-year quarter [1] - The earnings per share (EPS) estimate of $2.10 suggests a growth of almost 10% from the same quarter last year [2] Key Growth Drivers - Continued momentum in PM's smoke-free product portfolio, particularly with IQOS, ZYN, and VEEV, is expected to drive growth [3][10] - Management anticipates double-digit volume growth in smoke-free products for the second half of 2025, supported by a multicategory strategy aimed at converting users from combustible products [3] Operational Efficiency and Cost Management - PM is on track to achieve $2 billion in gross cost savings through its 2024-2026 program, focusing on manufacturing productivity and overhead optimization [4] - Despite investments in marketing and brand equity potentially impacting profitability, operational efficiency and pricing initiatives are expected to protect profit margins [4][10] Earnings Prediction Model - The current model does not predict a definitive earnings beat for PM, as it holds a Zacks Rank of 3 and an Earnings ESP of -0.66% [5]

Core Insights - Altria Group, Inc. is focusing on a smoke-free future, with its on! nicotine pouches driving significant growth in the oral tobacco products segment, achieving a retail share of 8.7% in the U.S. [1][8] - The company reported a 26.5% increase in shipment volume, reaching 52.1 million cans in the second quarter of 2025, contributing to substantial profit growth [2][8] - Altria's strategy, executed through its subsidiary Helix, emphasizes aggressive brand-building and emotional connections with adult consumers to maintain momentum in a competitive market [3][4] Market Position and Competition - Philip Morris International Inc. is also advancing in the smoke-free product space, with these products accounting for 41% of total net revenues and over 42% of gross profit in the second quarter of 2025, showing 11.8% shipment growth [5] - Turning Point Brands, Inc. is emerging as a competitor, with its Modern Oral sales increasing nearly eightfold year-over-year to $30.1 million, representing 26% of total revenues [6] Financial Performance - Altria's shares have increased by 15.4% over the past three months, contrasting with a 4.3% decline in the industry [7] - The company trades at a forward price-to-earnings ratio of 12.05X, lower than the industry average of 14.27X [10] - Zacks Consensus Estimate indicates year-over-year earnings growth of 6.1% for 2025 and 2.6% for 2026 [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]

Dividend Increase - Philip Morris International Inc. has raised its quarterly dividend by 8.9% to $1.47 per share, with the annualized dividend now totaling $5.88 per share, marking a total increase of 219.6% since 2008 [1][8] - The next dividend payment is scheduled for October 20, 2025, to shareholders on record as of October 3, 2025 [1] Growth Strategy - The company's long-term growth strategy is focused on its smoke-free transformation, with smoke-free products contributing 41% of total net revenues in Q2 2025, growing 15.2% year over year [2] - Key products driving this growth include IQOS, ZYN, and VEEV, positioning the company for sustainable growth and long-term value creation [2] Traditional Cigarette Business - Despite volume declines, the traditional cigarette business remains resilient, with combustible net revenues growing 2.1% in Q2, driven by price increases [3] - Marlboro achieved its highest quarterly market share since the 2008 spin-off, reinforcing the brand's strength and pricing leadership [3] Cost Efficiency Initiatives - The company achieved over $500 million in gross cost savings in the first half of the year through optimization initiatives, aiming for $2 billion in gross cost efficiencies between 2024 and 2026 [4] - By mid-2025, the company has already realized more than $1.2 billion in cost efficiencies, contributing to margin expansion [4] Earnings Outlook - Management has lifted its full-year adjusted earnings per share guidance to a range of $7.43-$7.56, indicating a growth of 13-15% [5] - This outlook reflects management's confidence in sustaining double-digit earnings growth despite ongoing regulatory and currency challenges [5] Stock Performance - Over the past six months, Philip Morris stock has risen 7.6%, compared to the industry's growth of 15.7% [10]

Core Insights - Altria Group, Inc. returned over $4 billion to shareholders in the first half of 2025 through dividends and share repurchases, demonstrating its strong cash-generating ability despite a challenging operating environment [1][8] Capital Return Strategy - Dividends are central to Altria's capital return strategy, with $3.5 billion distributed in the first half of 2025, reflecting the company's policy of returning the majority of earnings to shareholders [2] - Altria repurchased 10.4 million shares at an average price of $57.71, spending $600 million on buybacks, with $400 million remaining under its $1 billion share repurchase program [2][8] Financial Strength - Altria maintains a solid balance sheet, with a total debt-to-EBITDA ratio of 2.0x as of June 30, 2025, aligning with its financial targets and providing flexibility for shareholder returns [3][8] - The company's capital return strategy indicates management's confidence in its cash flow from tobacco and smoke-free products, reinforcing its position as a reliable income play in the consumer staples sector [4] Competitive Landscape - In contrast, Philip Morris International Inc. is focusing on smoke-free product expansion rather than capital returns, allocating resources to grow brands like IQOS, ZYN, and VEEV [5] - Turning Point Brands, Inc. reported a prudent financial position with total gross debt of $300 million and did not engage in share repurchases, focusing instead on market presence and product offerings [6] Valuation and Earnings Estimates - Altria's shares have decreased by 1.7% over the past month, compared to a 0.4% decline in the industry [7] - The company trades at a forward price-to-earnings ratio of 11.77X, lower than the industry average of 15.21X [10] - Zacks Consensus Estimates indicate year-over-year earnings growth of 5.3% for 2025 and 2.9% for 2026 [11]