Philip Morris points to strong momentum as it tops estimates; tobacco peers on watch

Philip Morris International (PM) gained in Wednesday morning trading following the release of its second quarter earnings report and gave a lift to the tobacco sector in general.

Revenue increased 7.6% on an organic basis to $11.2B, with both the smoke-free (+9.7% organically) and combustibles (+6.1% organically) businesses contributing positively. Notably, the smoke-free business accounted for approximately 42% of total revenue, with the company's smoke-free products now available in 109 markets. Shipments increased by 2.5% in the quarter, driven by a 7.5% increase in smoke-free, mainly due to IQOS, and complemented by a resilient combustible segment, notably in markets where SFPs are banned or have a limited market presence.

"We delivered outstanding results in the second quarter, driving net revenues to over $11 billion for the first time with excellent growth across all headline metrics," stated Philip Morris CEO Jacek Olczak. "With a robust first half under our belt, including continued momentum and strong results in our smoke-free business, we are well positioned to deliver on our full-year targets while investing for future growth," he added.

Adjusted operating income was $4.77B vs. $4.45B consensus and $4.25B a year ago in the same quarter. Adjusted diluted EPS was up 15% from a year ago to $2.20 vs. $2.05 consensus, which was noted to be above prior expectations primarily due to transactional effects.

Looking ahead, the company expects net revenue growth of 5% to 7% on an organic basis and organic operating income growth of 7% to 9%.

Shares of Philip Morris (PM) rose 1% in bouncy premarket trading since the earnings report dropped. Across the tobacco-related sector, RLX Technology (RLX), Ispire Technology (ISPR), Turning Point Brands (TPB), and Altria (MO) are on watch following the solid Philip Morris (PM) print.