By Shares of Philip Morris International rose about 7% on Wednesday after the tobacco giant reported stronger-than-expected first-quarter results, driven by robust growth in its smoke-free business and solid international performance.
The company’s earnings and revenue both exceeded analyst expectations, with adjusted earnings per share of $1.96 topping consensus estimates of around $1.83. Quarterly revenue came in at $10.146 billion, up 9.1% year over year and above market forecasts.
The gains were largely supported by strong momentum in smoke-free products, particularly in international markets, even as the company faced weakness in its US operations.
Smoke-free business drives international growth
Philip Morris’ smoke-free segment continued to be a key growth driver, accounting for 43% of total net revenues during the quarter. International revenue from smoke-free products rose about 25%, supported by higher volumes and pricing.
The company highlighted IQOS as its primary engine of growth globally. The product, which heats tobacco instead of burning it, has gained traction across multiple markets and is now part of a broader push toward reduced-risk alternatives.
Overall, net revenues increased 9.1% on a reported basis, with organic growth supported by favorable pricing and a strong mix of smoke-free products.
Gross profit rose 10.1%, while operating income climbed 9.8%, reflecting improved margins and operating leverage.
Shipment volumes for smoke-free products also expanded, helping offset declines in traditional cigarette volumes across certain regions.
US weakness weighs on performance
Despite strong international growth, Philip Morris reported a weaker quarter in the US, where volumes, revenue, and profit declined.
Revenue in the US segment fell sharply, with shipment volumes dropping more than 20%.
Shipments of Zyn nicotine pouches declined nearly 24%, reflecting what executives described as a tough comparison with the prior year and inventory overhang at the end of 2025.
While near-term performance was impacted, the company maintained that the underlying demand for smokeless nicotine products remains strong.
Management expects conditions to improve in the second half of the year as comparisons ease and new product launches support growth.
“We expect Zyn Ultra to be able to bring some renewing momentum to the brand in the coming months,” Chief Financial Officer Emmanuel Babeau said on an analyst call.
The company is awaiting regulatory review for its higher-strength Zyn Ultra product, which could provide an additional catalyst for recovery in the U.S. segment.
Outlook trimmed amid cost pressures
Philip Morris modestly lowered its full-year 2026 outlook, citing higher input and transportation costs.
The company now expects adjusted earnings per share in the range of $8.36 to $8.51, slightly down from its previous guidance.
For the second quarter, the company projected adjusted EPS between $2.02 and $2.07, below analyst expectations.
Management said geopolitical tensions in the Middle East had a limited impact during the quarter, mainly affecting travel retail and certain regional markets.
While uncertainty remains, the company does not currently expect prolonged disruption, though higher energy prices and supply chain costs are being factored into its outlook.
Despite these headwinds, Philip Morris reiterated its confidence in the long-term growth of its smoke-free portfolio, with continued investments planned to support expansion and innovation.
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