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Philip Morris International Inc. (PM) Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered strong organic growth and margin expansion: net revenues $9.30B (+10.2% organic), adjusted diluted EPS $1.69 (+12.7% YoY; +17.3% ex-currency), and adjusted operating income margin 40.7% (+2.5pp YoY) .
  • Versus Wall Street consensus, PM posted a beat on revenue ($9.30B vs $9.14B*) and EPS ($1.69 vs $1.61*); beats were driven by smoke-free momentum (IQOS, ZYN) and pricing, partially offset by currency headwinds. Values retrieved from S&P Global*.
  • FY25 adjusted EPS guidance raised for currency only to $7.36–$7.49 (ex-currency unchanged at $7.26–$7.39); Q2 2025 adjusted EPS guided to $1.80–$1.85 including ~$0.06 FX tailwind .
  • Key catalysts: acceleration in U.S. ZYN as capacity ramps (full normalization targeted mid-H2), continued double-digit IQOS IMS growth, and further margin expansion; watch EU flavor-ban annualization and Indonesia model change .

What Went Well and What Went Wrong

  • What Went Well

    • “Exceptionally strong performance” with smoke-free organic net revenue up 20.4% and gross profit up 33.1%; smoke-free now ~42% of net revenues and ~44% of gross profit .
    • IQOS: adjusted IMS +9.4% globally; share gains to record levels in Japan (HTU adjusted share 32.2%) and Europe (11.4%); multi-city offtake milestones (e.g., HTU >50% of offtake in key Japanese cities) .
    • ZYN: U.S. shipments exceeded 200M cans in Q1 (+53% YoY) on ahead-of-schedule capacity; international nicotine pouches also +53% in cans, reinforcing multicategory strategy .

  • What Went Wrong

    • Currency headwinds: ~$0.07 unfavorable variance to adjusted EPS; transactional losses tied to FX volatility .
    • EU flavor-ban annualization weighed on HTU in Italy and select markets; management expects progressive recovery through the year .
    • Indonesia commercial model change reduced reported net revenue growth in SSEA/CIS/MEA (no meaningful OI impact but pressure on revenue optics) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Revenues ($USD Billions)$9.91 $9.71 $9.30
Reported Diluted EPS ($)$1.97 $(0.38) $1.72
Adjusted Diluted EPS ($)$1.91 $1.55 $1.69
Adjusted OI Margin (%)41.9% 36.3% 40.7%

Estimates vs Actuals (S&P Global):

MetricQ3 2024 EstimateQ3 2024 ActualQ4 2024 EstimateQ4 2024 ActualQ1 2025 EstimateQ1 2025 Actual
Revenue ($USD Billions)$9.689$9.911$9.436$9.706$9.144$9.301
EPS ($)$1.82$1.91$1.50$1.55$1.61$1.69
# of Revenue Estimates6—6—6—
# of EPS Estimates9—9—10—

Values retrieved from S&P Global*.

Segment Net Revenues and Margins (Q1 2025):

RegionNet Revenues ($USD Billions)Adjusted OI Margin (%)
Europe$3.560 41.6%
SSEA, CIS & MEA$2.743 33.7%
EA, AU & PMI GTR$1.731 52.8%
Americas$1.267 37.3%
Total PMI$9.301 40.7%

KPIs (Q1 2025):

KPIQ1 2025YoY Change
Total Shipment Volume (bn units)187.8 +3.9%
Smoke-Free Shipment Volume (bn units)43.0 +14.4%
HTU Shipment Volume (bn units)37.1 +11.9%
Oral SFP (bn cans)5.3 +27.2%
E-vapor (bn units equiv.)0.6 >100%
Total International Market Share28.6% +0.7pp
Cigarette Market Share23.0% +0.2pp
HTU Market Share5.7% +0.6pp
Cigarette over Cigarette Market Share24.8% +0.4pp

Guidance Changes

MetricPeriodPrevious Guidance (Feb 6, 2025)Current Guidance (Apr 23, 2025)Change
Reported Diluted EPSFY 2025$6.55–$6.68 $7.01–$7.14 Raised
Adjusted Diluted EPSFY 2025$7.04–$7.17 $7.36–$7.49 Raised (currency only)
Adjusted EPS ex-currencyFY 2025$7.26–$7.39 $7.26–$7.39 Maintained
Organic Net Revenue GrowthFY 2025~6%–8% ~6%–8% Maintained
Organic Operating Income GrowthFY 202510.5%–12.5% 10.5%–12.5% Maintained
Effective Tax RateFY 2025~22.5%–23.5% ~22.5%–23.5% Maintained
Operating Cash FlowFY 2025~$11B >$11B (incl. ~$1B one-offs) Maintained
Capital ExpendituresFY 2025~$1.5B ~$1.5B Maintained
Net Debt / Adjusted EBITDAFY 2026 Target~2x by YE 2026 ~2x by YE 2026 Maintained
U.S. ZYN Shipment VolumeFY 2025780–820M cans 800–840M cans Raised
HTU Adjusted IMS GrowthFY 2025~10%–12% 10%–12% Maintained
Q2 Adjusted Diluted EPSQ2 2025N/A$1.80–$1.85 incl. ~$0.06 FX New
DividendQuarterly$1.35/share $1.35/share Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Smoke-free margin accretionSFB gross margin > combustible by >450bps; strong pricing & mix Gap expanding; ZYN best-in-class margins; easing COGS headwinds +670bps organic SFB gross margin expansion; >70% SFB gross margin Improving
ZYN U.S. capacity & out-of-stocksCapacity ramp; expect supply match in Q4’24; share stabilization Normalization gradually through 2025; 900M cans capacity target; FDA authorization highlight Shipments +53% to 202M cans; replenishment underway; normalization targeted by Q3 Improving supply
EU flavor-ban impactReacceleration in Europe; Italy recovery underway Italy slower in Q4; annualization impact expected Q1’25 Annualization notably weighed early; recovery expected through H2 Transitional headwind fading
IQOS IMS growth+14.8% adjusted IMS; strong Japan/Europe H2 acceleration to ~14%; continued double-digit target ~+9.4% in Q1 despite FX; guidance for double-digit IMS rest of year Sustained double-digit
Regulatory/legalCanada CCAA developments; reconsolidation optionality RBH impairment ($1.49) booked; potential future dividends U.S. CTP timing uncertain; IQOS ILUMA hopes for 2025 Monitoring
Tariffs/macro & FXCurrency headwinds; pricing offsets Euro-balance sheet hedging explained; FX mix (yen/ruble) FX transactional losses; $0.07 EPS drag; no material tariff impact expected Volatile FX

Management Commentary

  • CEO Jacek Olczak: “We achieved exceptionally strong performance in the first quarter, with continued volume growth supporting an excellent top-line performance and very strong margin expansion… Our smoke-free business goes from strength to strength…” .
  • CFO Emmanuel Babeau: “We delivered… double-digit increases in organic net revenue, operating income and adjusted diluted EPS… fueled by rapid growth of ZYN and continued volume momentum… IQOS delivered close to +10% HTU adjusted IMS growth… adjusted OI margin reached 40.7% despite currency headwinds” .
  • On ZYN supply: “We target full normalization of the supply situation in Q3 this year… shipments will reflect both consumer offtake acceleration and replenishment” .
  • On margins: “Smoke-free gross margin now above 70%… many positive drivers: ZYN mix, IQOS scale, productivity, pricing, improving VEEV margins” .

Q&A Highlights

  • ZYN normalization: Out-of-stocks remain but replenishment underway; normalization targeted by Q3 2025; shipments profile will show accelerating growth then fade as inventories normalize .
  • Margin drivers: Smoke-free mix (ZYN in U.S.), pricing, cost/productivity, easing COGS headwinds; robust margin expansion expected in 2025 .
  • IQOS IMS trajectory: Expect reacceleration in H2 as EU flavor-ban annualization fades; double-digit adjusted IMS growth sustained .
  • Guidance phasing: Strong H1 implies slightly lower constant-currency EPS growth in H2 due to phasing of SG&A and shipments; underlying momentum intact .
  • U.S. regulatory timelines: CTP process uncertainty; PM expects efficient approvals but provided no timing updates for IQOS ILUMA .

Estimates Context

  • PM beat Q1 2025 consensus on revenue and EPS: actual $9.30B vs $9.14B*, and $1.69 vs $1.61*, reflecting smoke-free growth and pricing; currency was a headwind to EPS. Values retrieved from S&P Global*.
  • Prior quarters also beat: Q3 2024 revenue $9.91B vs $9.69B*, EPS $1.91 vs $1.82*; Q4 2024 revenue $9.71B vs $9.44B*, EPS $1.55 vs $1.50*. Values retrieved from S&P Global*.
  • Estimate revisions likely to push FY25 adjusted EPS toward the top-end given raised currency assumption and ZYN shipment guidance increase, while ex-currency EPS range is unchanged .

Key Takeaways for Investors

  • Smoke-free leadership accelerating: IQOS and ZYN drove double-digit organic growth and >70% smoke-free gross margins—core to PM’s margin expansion trajectory .
  • Actionable: Position for continued beats as supply normalizes in U.S. ZYN and IQOS IMS accelerates in H2; watch Q2 EPS ($1.80–$1.85) as a near-term marker .
  • Guidance quality: FY25 adjusted EPS raised for currency only; ex-currency guidance maintained—signals confidence in operational levers despite FX .
  • Regional mix: EA/AU & PMI GTR posted 52.8% adjusted OI margins; Americas strong at 37.3% with U.S. ZYN; Europe pressured by higher SG&A but improving .
  • Risks to monitor: EU flavor-ban annualization (near-term), Indonesia reporting optics, FX volatility; management cites no material tariff impact currently .
  • Balance sheet: OCF >$11B, capex ~$1.5B, deleveraging progressing toward ~2x net debt/EBITDA by YE26—supports dividend continuity ($1.35/qtr) and future optionality .
  • Trading implications: Near-term sentiment positive on beats and guidance; H2 ramp in smoke-free plus ZYN capacity normalization are potential re-rating catalysts; FX remains a swing factor .
Notes: All figures and statements are cited from PM’s Q1 2025 8-K and press release, Q1 2025 earnings call, and prior quarter materials. Consensus estimates marked with * are values retrieved from S&P Global.

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