Philip Morris delivered results ahead of Wall Street’s expectations in Q1, driven primarily by strong momentum in its smoke-free product portfolio. Management credited the rapid growth of ZYN nicotine pouches and continued expansion of IQOS heated tobacco units as key contributors, with shipment volumes up significantly year over year. The company also benefited from improved manufacturing productivity and favorable shipment timing. CFO Emmanuel Babeau noted, “Our smoke-free business now accounts for 44% of total gross profit, as we continue to deploy our multi-category strategy across markets and broaden our growth opportunities.”
Is now the time to buy PM? Find out in our full research report (it’s free).
Philip Morris (PM) Q1 CY2025 Highlights:
- Revenue: $9.3 billion vs analyst estimates of $9.06 billion (5.8% year-on-year growth, 2.6% beat)
- Adjusted EPS: $1.69 vs analyst estimates of $1.61 (4.8% beat)
- Management raised its full-year Adjusted EPS guidance to $7.43 at the midpoint, a 4.5% increase
- Operating Margin: 38.1%, up from 34.6% in the same quarter last year
- Sales Volumes were up 3.9% year on year
- Market Capitalization: $285.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Philip Morris’s Q1 Earnings Call
- Bonnie Herzog (Goldman Sachs) asked about the timeline for resolving ZYN out-of-stock issues and the phasing of shipment growth. CFO Emmanuel Babeau explained that inventory replenishment would continue through Q2, with normalization expected by Q3.
- Herzog (Goldman Sachs) also questioned the drivers of margin expansion given ongoing investments. Babeau stated that smoke-free products, particularly ZYN and IQOS, are driving higher gross margins, with positive mix and productivity gains expected to persist.
- Matt Smith (Stifel) sought clarification on why full-year EPS guidance was not raised further, despite a strong first half. Babeau cited cautious positioning due to macroeconomic uncertainty and shipment phasing as reasons for maintaining guidance.
- Smith (Stifel) inquired about the expected acceleration in IQOS IMS growth in the second half of the year. Babeau noted that annualization of EU flavor bans would lessen, supporting stronger growth in Europe and Japan.
- Eric Serotta (Morgan Stanley) pressed for details on unconstrained ZYN demand and margin implications. Babeau indicated that true demand would become clearer as supply constraints ease, with additional marketing activities resuming and expected to drive further growth.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will closely monitor (1) the pace of ZYN inventory normalization and retail offtake in the U.S., (2) the impact of new product launches and marketing initiatives for IQOS and VEEV across key international markets, and (3) the company’s ability to sustain margin expansion amid ongoing investments in supply chain and marketing. Regulatory developments and progress on U.S. manufacturing capacity will also be important factors to watch.
Philip Morris currently trades at $184.45, up from $163.99 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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