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By Brian Nelson, CFA
Philip Morris (PM) reported mixed second quarter results July 22, with revenue coming in slightly below expectations, but non-GAAP earnings per share exceeding the consensus forecast. Net revenues increased 7.1% on a reported basis and 6.8% on an organic basis. Its smoke-free business experienced a 15.2% increase in revenue, with 14.5% of that organic. Its combustible portfolio showed a 2.1% increase in revenue, with 2% of that organic. Operating income increased 7.8% on a reported basis in the quarter, while it expanded 14.9% on an organic basis versus the second quarter of 2024. Adjusted diluted earnings per share, excluding currency, increased 18.9% in the quarter.
Management had the following to say about the results:
Our business delivered very strong results in the second quarter, with record net revenues and exceptional growth in operating income and adjusted diluted EPS.
These results reflect excellent momentum in our multicategory smoke-free business, with a reacceleration of IQOS adjusted in-market sales growth and ZYN U.S. offtake growth, coupled with combustibles resilience. Given our strong year-to-date performance, we are raising our full-year guidance.
Looking to 2025, Philip Morris is targeting reported diluted earnings per share in the range of $7.24-$7.37 versus $4.52 last year. Adjusted diluted earnings per share is expected in the range of $7.43-$7.56 versus $6.57 last year. Adjusted diluted earnings per share, excluding currency, is budgeted in the range of $7.33-$7.46 versus $6.57 last year. In the second quarter, Philip Morris’ smoke-free business accounted for 41% of total net revenue, as it continues to benefit in part from rampant ZYN adoption. In the U.S., “ZYN reaccelerated its offtake growth to approximately 36% in June, and 26% in Q2 overall as measured by Nielsen.” We continue to like Philip Morris’ smoke-free business and have no qualms with it as a idea in the High Yield Dividend Newsletter portfolio.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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