Key Takeaways Philip Morris' smoke-free shipments rose 11.8%, driving 15.2% revenue growth in Q2 2025.IQOS, ZYN and VEEV fueled smoke-free growth, lifting gross profit by 23.3% year over year.Cigarette shipments fell 1.5% to 155.2B units, but still delivered $6B in quarterly revenues.Philip Morris International Inc.’s (PM) second-quarter 2025 results spotlight the central question for its long-term transformation: Can smoke-free momentum truly outweigh persistent declines in cigarettes? Smoke-free products, ...

Key Takeaways Altria's on! shipments rose 26.5% in Q2, lifting oral tobacco share to 8.7% and boosting margins.Philip Morris lifted 2025 EPS guidance to $7.43-$7.56, targeting 13-15% year-over-year growth.Philip Morris achieved $500M in cost savings in H1 2025, advancing toward a $2B efficiency goal.Altria Group, Inc. ((MO) and Philip Morris International Inc. ((PM) stand as two of the most recognized names in the global tobacco industry. While Altria primarily operates within the United States, Philip Morr ...

Key Takeaways Philip Morris trades at a forward P/E of 20.93X, above the industry and sector averages.Smoke-free products made up 41% of revenues in Q2, growing 15.2% y/y, led by IQOS, ZYN and VEEV.Philip Morris targets $2B in cost efficiencies between 2024 and 2026.Philip Morris International Inc. ((PM) is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 20.93X, representing a significant premium compared with the Zacks Tobacco industry average of 15.31X and the broader Consumer ...

Investment Rating - The report maintains an "Outperform" rating for the light industry sector [6][10]. Core Insights - Recent financial reports from major overseas tobacco companies for H1 2025 show overall stable performance, with new tobacco products continuing to drive growth. British American Tobacco, Philip Morris International, and Japan Tobacco have all raised their annual forecasts [18]. Summary by Relevant Sections British American Tobacco (BAT) - For H1 2025, BAT reported revenues of £12.069 billion, a decrease of 2.2% year-on-year, with new tobacco products accounting for 13.7% of total revenue [2][19]. - The revenue from heated tobacco products was £440 million, showing a slight increase of 0.8%, while the revenue from new oral tobacco products surged by 38.1% to £470 million [20][21]. Philip Morris International (PMI) - PMI's Q2 2025 net revenue reached $10.14 billion, reflecting a year-on-year increase of 7.1%, with smoke-free tobacco products making up 41.6% of total revenue [3][28]. - The global shipment of heated tobacco units was 38.8 billion, up 9.2% year-on-year, with IQOS market share in Japan increasing to 31.7% [29]. Japan Tobacco - Japan Tobacco reported Q2 2025 revenues of ¥907.6 billion, a 9.4% increase year-on-year, with heated tobacco product shipments rising by 31.2% [4][38]. - The company has adjusted its annual revenue growth forecast to 8.4% and operating profit growth to 14.6% [38]. Altria - Altria's Q2 2025 revenue was $6.1 billion, down 1.7% year-on-year, with oral tobacco product revenue increasing by 5.9% [5][12]. Market Overview - The light industry sector experienced a relative return of +0.16% last week, despite a decline of 1.59% in the overall sector [6][9]. - Furniture retail sales in June increased by 28.7% year-on-year, while building materials sales saw a decline of 8.9% [6][12]. Investment Recommendations - The report recommends focusing on leading companies in the home furnishing sector, such as Oppein Home, Sophia, and Kuka Home, as well as in the paper and packaging sectors, highlighting Sun Paper and Yutong Technology as key investment opportunities [9][16].

Investment Rating - Industry rating is maintained as "Outperform" [9] Core Insights - The report highlights that reduced-harm products and oral tobacco have become the core growth engines for British American Tobacco (BAT) and Philip Morris International (PMI) [1][3] - BAT's revenue for the first half of 2025 was £12.069 billion, a decrease of 2.2% year-on-year, but a 1.8% increase when excluding currency effects, primarily driven by recovery in the US market [1] - PMI reported a revenue of $19.4 billion for the first half of 2025, reflecting a year-on-year growth of 6.5% [3] Summary by Sections British American Tobacco (BAT) - BAT's operating profit for the first half of 2025 was £5.069 billion, a year-on-year increase of 19.1%, with an operating margin rising by 7.5 percentage points to 42.0% [1] - The diluted EPS for BAT was £2.036, up 1.6% year-on-year [1] - The number of consumers of BAT's reduced-harm products reached 30.5 million, an increase of 1.4 million year-on-year [2] - Modern oral products generated £470 million in revenue, a 38.1% increase year-on-year, with sales volume rising by 42.2% [2] Philip Morris International (PMI) - PMI's gross profit for the first half of 2025 was $13.1 billion, a 12.0% increase year-on-year [3] - The adjusted diluted EPS for PMI was $3.6, reflecting a year-on-year growth of 16.1% [3] - PMI's total shipment volume for the first half of 2025 was 387.9 billion units, a 2.5% increase year-on-year [4] - Reduced-harm product shipments reached 87.9 billion units, a 13.1% increase year-on-year, with 41.5 million consumers globally, an increase of 5 million [4] Regional Performance - In Japan, IQOS covered over 10 million legal-age consumers, with a shipment volume of 13.9 billion units in Q2 2025, a 3.2% increase year-on-year [6] - In the EU, IQOS shipments reached 6 billion units in Q2 2025, a 13.21% increase year-on-year [6] - In South Korea, IQOS shipments were 1.6 billion units in Q2 2025, a 12.8% increase year-on-year [6] Investment Opportunities - The report suggests focusing on the vaping supply chain, including companies like Smoore International and Yihua Healthcare, as well as the tobacco supply chain with companies like China Tobacco Hong Kong and China Boton [7]

Investment Rating - The investment rating for the company is "Positive" [2] Core Insights - The company reported a revenue of $10.14 billion for Q2 2025, representing a year-on-year increase of 7.1%, with a gross margin of 68.3%, up by 4.1 percentage points [2] - Revenue from new tobacco products reached $4.16 billion, showing a year-on-year growth of 15.2%, accounting for 41% of total revenue, with a gross margin of 69.0%, an increase of 4.6 percentage points [2] - The new tobacco segment is viewed as the company's second growth curve, with continuous expansion in product and regional matrices, now available in 97 markets globally, with a total user base of 41.5 million, an increase of 5 million year-on-year [2] - The core product, IQOS, achieved a shipment volume of 39.9 billion units in Q2, a year-on-year increase of 9.2%, with revenue exceeding $3 billion and a market share of 76% in the HNB market [2][3] - The company anticipates a decline of 2% in global cigarette sales for 2025, while maintaining a growth forecast of 12% to 14% for new tobacco products, with HNB growth expected at 10% to 12% [3] Summary by Sections Financial Performance - Q2 2025 revenue was $10.14 billion, up 7.1% year-on-year, with a gross margin of 68.3% [2] - New tobacco revenue was $4.16 billion, a 15.2% increase, with a gross margin of 69.0% [2] Product Performance - IQOS shipments reached 39.9 billion units, a 9.2% increase, with revenue over $3 billion [2][3] - The nicotine pouch segment saw a 23.8% increase in sales, driven by the ZYN brand in the U.S. [3] - VEEV sales doubled in Q2 2025, primarily due to European market contributions [3] Market Outlook - The company expects a 2% decline in cigarette sales for 2025, while new tobacco products are projected to grow by 12% to 14% [3] - The introduction of IQOS ILUMA in the U.S. is anticipated to be a significant change in the new tobacco industry [3]

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]

Company Overview and Strategic Direction - Philip Morris International is a leading global producer of tobacco and nicotine products, operating in approximately 170 markets with well-known brands such as Marlboro, Parliament, IQOS, ZYN, and VEEV [2] - The company is transitioning from traditional combustible cigarettes to smoke-free alternatives, including heated tobacco devices, oral nicotine pouches, and electronic vapor products [3] Quarterly Performance Highlights - In Q2 2025, adjusted earnings per share were $1.91, exceeding the estimate of $1.86 by 2.7%, while GAAP revenue was $10.1 billion, falling short by 2.1% [1] - Smoke-free products accounted for 41% of net revenue, an increase of 2.9 percentage points year-over-year, with gross profit from these products exceeding 42% of total gross profit [4] - Shipments of smoke-free products rose by 11.8%, with net revenue in this segment increasing by 15.2% and gross profit up by 23.3% [4] Product Performance - IQOS generated over $3 billion in net revenue, holding a 76% share of the global heat-not-burn category, with sales volumes in Europe growing by 9.1% and in Japan by 7.8% [5] - ZYN pouches saw a global shipment volume increase of 26.5%, with U.S. shipments rising over 40% to 190 million cans [6] - VEEV e-vapor product volumes more than doubled, achieving top market positions in six European countries [6] Traditional Cigarette Segment - Traditional cigarette volumes declined by 1.5%, but revenue for this segment grew by 2.1% due to strong pricing [7] - Marketing, Administration, and Research Costs increased by 16.0% compared to the previous year [7] Regional Performance - Europe's organic revenue rose by 7.3%, driven by smoke-free growth, while the Americas experienced a 17% increase in organic net revenues, primarily from oral nicotine [8] - The European market faced a 1.7% decline in shipment volume, mainly due to cigarette declines in specific countries [8] Future Outlook - The company raised its full-year adjusted diluted EPS guidance to $7.43, reflecting an 11.5% to 13.5% growth from last year's adjusted EPS of $6.57 [10] - Organic net revenue growth is forecasted at 6-8%, with smoke-free product volumes expected to grow by 12-14% and cigarette volumes projected to decline by about 2% [10] - Capital expenditure guidance is set at $1.6 billion, primarily for smoke-free product scale-up, with operating cash flow expected around $11.5 billion [10]

Financial Performance - The company experienced strong growth in Q2 2025, with adjusted diluted EPS up by 201%[7] - Adjusted operating income increased by 161%[7] and net revenues grew by 68%[7] - For H1 2025, adjusted diluted EPS increased by 161%[8], adjusted operating income by 145%[8], and net revenues by 65%[8] - The company is raising its 2025 forecast to 13-15% adjusted diluted EPS growth[6] Smoke-Free Products (SFP) - Smoke-free products are driving total volume growth[10], with H1 2025 shipment volume increasing by 131%[10] - Smoke-free net revenues and gross profit showed organic growth of 270%[11] and 154%[11] respectively in H1 2025 - The company's multicategory strategy is catalyzing SFP user growth to over 41 million[17] - IQOS quarterly net revenues are over $3 billion[19] ZYN (Nicotine Pouches) - ZYN nicotine pouch shipment volumes increased by 43%[22] in Q2 2025 compared to the previous year - U S ZYN volumes increased by 41%[22] and international volumes excluding Nordics increased by 179%[22] - The company expects strong H2 offtake growth for ZYN as retail availability normalizes[31] Regional Performance - Europe experienced a 135%[25] growth in IQOS, ZYN & VEEV shipment in Q2 2025 - In Japan, the company's HTU adjusted IMS grew by 78%[26] in Q2 2025, with a 48%[26] HnB offtake category share - The company is seeing excellent IQOS key city progress across global markets[34]

Core Insights - Philip Morris International Inc. (PM) demonstrates strong pricing power as a key driver of profitability, reporting 10.2% organic net revenue growth and 16% organic operating income growth in Q1 2025, with a gross margin expansion of 340 basis points [1][7] - The smoke-free segment, including products like IQOS and ZYN, achieved 670 basis points of organic gross margin expansion, exceeding 70%, which is over 5 percentage points higher than combustibles, indicating a favorable product mix and premium positioning [2][3] Revenue and Pricing Dynamics - Pricing contributed 6 points to net revenue growth, with an 8% increase in combustible pricing and around 3% in smoke-free products excluding devices [1][7] - The company's ability to implement effective pricing strategies across both combustible and smoke-free categories highlights strong brand equity and consumer loyalty [3] Competitive Landscape - Altria Group, Inc. (MO) also exercises pricing power, achieving a 10.8% net price realization in the smokeable segment, but faces challenges with growing price sensitivity among lower-income consumers [4] - Turning Point Brands, Inc. (TPB) focuses on brand strength and market positioning rather than aggressive pricing, showing volume resilience amid consumer trade-down trends [5] Market Performance and Valuation - Philip Morris shares have gained 18.4% in the past three months, slightly outperforming the industry growth of 18.2% [6] - The company trades at a forward price-to-earnings ratio of 22.43X, higher than the industry's average of 15.36X [9] Earnings Estimates - The Zacks Consensus Estimate for PM's earnings implies year-over-year growth of 13.7% for 2025 and 11.7% for 2026, with current estimates of $7.47 for 2025 and $8.34 for 2026 [11][12]