Earnings Coverage: Why Philip Morris Is Down 5% After Earnings

Live Updates

Live Coverage
Updates appear automatically as they are published.

Cigarette sales drop but ZYN growing

8:37 am

Cigarette shipments fell 1.5%, with big drops in France and Italy hurting overall volume, but ZYN sales in the U.S. jumped 40% as shelves restocked and buyers returned to buy up the extra volume.

Strong Results, but Cautious Forward Setup

8:34 am

While PMI’s Q2 showed impressive growth in its smoke-free portfolio and strong EPS execution, investors were spooked by signs of decelerating momentum, exposure to weak cigarette volumes, and less robust operating leverage than expected. The market reaction reflects a recalibration of expectations—not necessarily a judgment that the business is underperforming, but that the upside from here may be more limited in the near term.

Investor Sentiment Running Hot?

8:09 am

PM shares closed at $180.48 on July 21, and were down 5% pre-market to $171.72  despite beats. This suggests that:

• Investor expectations were already high, possibly anticipating a more robust hike to FY guidance.

• The price target range from analysts ($143.45 low to $220 high) implies the stock was near the top of its valuation range.

• PMI’s average price target is ~$178.78, meaning the post-earnings drop merely resets the stock closer to consensus valuation.

Philip Morris  (NYSE: PM) reported this morning and investors were not impressed with the numbers off the bat.

In premarket trading, shares are up a down just under 4%. Let’s take a closer look at what shacked investors confidence in reporting Q2 earnings.

Philip Morris Earnings 

Philip Morris International reported a 7.8% year-over-year revenue increase to $10.14 billion in Q2 25, while gross profit jumped 17.6% to $6.90 billion and operating income rose 6.2% to $3.71 billion, underscoring robust margin growth.

Adjusted EPS came in at $1.91, up +20.1% year-over-year, and beat the consensus estimate of $1.86.

The smoke-free business was a standout, with 15.2% revenue growth and 23.3% gross profit growth, now making up 41% of total revenues.

These results supported a raised full-year adjusted EPS guidance to $7.43–$7.56 (up from $7.32–$7.44 prior), representing 13–15% growth.

Jacek Olczak told investors that PM “delivered record net revenues and exceptional growth in operating income and adjusted diluted EPS” in Q2, signaling very strong results. He went on to say, “Given our strong year-to-date performance, we are raising our full-year guidance,” reflecting a very bullish outlook. Traders will be watching to see if momentum in smoke-free products keeps driving gains.

Why Shares Are Dragging

Guidance Quality and Q3 Outlook Disappointed

• While FY25 guidance was raised, the Q3 EPS guide of $2.08–$2.13 implies only modest sequential EPS growth. That midpoint ($2.105) is just ~11.5% YoY growth, down from the ~20%+ YoY growth rate just reported for Q.
• That suggests growth may decelerate sharply in H2, which disappoints momentum-driven investors.

Margins Boosted by One-Time FX, Not Operating Leverage

• The currency impact was a +2 cent tailwind to EPS in Q2, helping PMI beat estimates.
• However, adjusted operating margin improvement (3.3pp YoY to 41.9%) came despite a 16% YoY increase in marketing/admin/research costs, suggesting margin leverage came largely from pricing—not from sustainable efficiency gains

Cigarette Volumes Declined More Sharply in Key Markets

• Cigarette shipment volume declined 1.5% YoY, with particularly steep drops in France (-17.5%), Italy (-4.1%), and Poland (-4.6%), reflecting weak underlying demand and inventory drawdowns in Europe.

• In Indonesia, volume fell 3.7%, partly due to regulatory issues.

• This has negative implications for PMI’s cash cow combustible segment, which still contributes the majority of profits

The post Earnings Coverage: Why Philip Morris Is Down 5% After Earnings appeared first on 24/7 Wall St..