Philip Morris International Surges to All-Time Highs: First-Quarter Insights (NYSE: PM)
Strong Growth Drives Stock Performance
Shares of Philip Morris International have reached an all-time high, propelled by impressive earnings results. As of now, the stock is up nearly 40% in 2025 and has gained over 75% in the past year. Investors are keen to determine if it’s still a good time to buy or if they have already missed their opportunity. Let’s delve into its first-quarter performance for insights.
Sales Growth Fueled by Zyn
The primary growth engine for Philip Morris remains Zyn, a nicotine pouch made without tobacco. Its popularity among young adults and professionals is notable due to its discreet nature and varying flavors.
In the first quarter, Zyn shipments in the U.S. surged 53% to reach 202 million cans. International shipments also climbed by 53%, or 182% when excluding established Nordic markets. Overall oral product shipments experienced a growth of 27%.
While some of this growth stemmed from retail inventory replenishment, the company reported a solid off-take volume increase of approximately 15% for Zyn. Expectation is that growth will continue to accelerate as in-store availability improves and marketing efforts ramp up. Consequently, the company has revised its U.S. Zyn shipment forecast for 2025 to between 800 million and 840 million cans, an increase from its previous projection of 780 million to 820 million cans.
Image source: Getty Images.
The company’s heated tobacco units (HTUs) also showed strong performance. Volumes for HTUs, including the IQOS system, rose nearly 12% to 37.1 billion units. In-market sales increased by 9% in Japan and over 7% in Europe, with significant growth also occurring in cities outside these regions, like Jakarta and Mexico City. Additionally, shipments for its e-vapor product, VEEV, more than doubled, largely due to pod expansion in Europe.
Conversely, traditional cigarette volumes saw a slight rise of 1.1% to 144.8 billion units. Market share, excluding the U.S. and China, increased by 0.2% to 23%, and by 0.4% to 24.8% when including HTUs.
On a broader scale, organic revenue, which factors out currency fluctuations and changes from acquisitions, grew by 10% year over year to $9.3 billion. Adjusted earnings per share (EPS) rose 17% to $1.76. Organic revenue from combustible tobacco increased by 4%, driven by pricing strategies and modest volume growth, while the smoke-free sector saw a striking 20% increase.
| Oral Products (Zyn) | HTUs | Cigarettes | Smoke-Free | Total | |
|---|---|---|---|---|---|
| Volume growth | 27.2% | 11.9% | 1.1% | N/A | 3.9% |
| Organic revenue growth | N/A | N/A | 3.8% | 20.4% | 10.2% |
HTUs = heated tobacco units.
Gross profits outpaced revenue growth, with organic profits rising 16%. Both Zyn and IQOS maintain higher gross margins compared to traditional cigarettes, leading to a 340 basis point increase in gross margins year over year. The company noted further margin improvements across all smoke-free product categories, supported by price increases for Zyn and IQOS.
Looking forward, Philip Morris has broadly maintained its full-year guidance, with slight adjustments to the adjusted EPS forecast due to currency fluctuations.
| Guidance | |
|---|---|
| Organic revenue growth | 6% to 8% |
| Adjusted EPS | $7.01 to $7.14 |
| Adjusted EPS growth, excluding currency | 10.5% to 12.5% |
| Volume growth | 2% |
Data source: Philip Morris International. EPS = earnings per share.
Opportunities for Future Investment
Philip Morris continues to expand, driven by the growth of Zyn and IQOS. Both products boast better unit economics compared to traditional cigarettes, which also show consistent performance with solid pricing power. This contrasts with tobacco companies focused solely on cigarettes in the U.S.
Expansion opportunities are abundant for Zyn and IQOS. Philip Morris is increasing U.S. production to meet Zyn demand and is starting to expand into new international markets beyond the Nordics. Following its acquisition of U.S. rights to IQOS, the company has begun testing IQOS in Austin, Texas, aiming for broader market entry once its new IQOS ILUMA device secures FDA approval.
Valuation indicates that the stock currently trades at a forward price-to-earnings (P/E) ratio of 23 times based on analyst expectations for 2025, with a PEG (price/earnings-to-growth) ratio below 0.4. Stocks with a PEG ratio under 1 are generally considered undervalued, suggesting that there may still be value in the stock.
In summary, Philip Morris represents a growth opportunity within a defensive industry. It offers an attractive forward dividend yield of 3.2%, while also demonstrating resilience against tariffs through local manufacturing. Thus, for those considering an investment, now may still be a favorable time to enter, particularly if future price dips arise.
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Investors should carefully evaluate their options, weigh analyst guidance, and consider past performance when deciding whether to invest in Philip Morris International or alternative stocks that may offer better opportunities.
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