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Shares of Philip Morris International rose Wednesday after the tobacco company reported better-than-expected earnings and a rebound in shipments of its Zyn nicotine pouches.
The company on Wednesday posted adjusted earnings of $2.20 a share for the second quarter, from $1.91 a year ago and above Wall Street’s expectation of $2.03. However, that number fell to $2.17 after excluding foreign-exchange impacts.
Revenue grew 10% to $11.2 billion, beating the analyst consensus call for $10.6 billion, according to FactSet.
Philip Morris stock advanced 2.7% to $193.09 in afternoon trading.
The company lowered its full-year profit guidance, expecting adjusted earnings between $8.26 and $8.41 a share, down from its previous forecast of $8.36 to $8.51. The analyst consensus calls for full-year profit of $8.36 a share, according to FactSet.
The tobacco giant continues to expect full-year organic revenue growth of 5% to 7%. For the third quarter, Philip Morris expects adjusted earnings of $2.20 to $2.25 a share, well below Wall Street’s forecast of $2.42.
Philip Morris said the new guidance factors in adverse currency conditions as well as increases in transport and energy costs because of the U.S. war with Iran. To this point, while Philip Morris revised lower its adjusted full-year profit outlook, it kept its guidance for adjusted earnings, excluding foreign-exchange impacts, steady at $8.11 to $8.26 a share.
The company added that it plans to “accelerate U.S. investments” in the second half of the year to “maximize the long-term value” of its Zyn oral nicotine pouch brand.
However, investors appeared to be looking past the guidance revision and focusing on the other bright spots in the results.
The company’s international smoke-free business saw shipment volumes grow 8% in the second quarter. In the U.S., where Zyn nicotine pouches are the company’s main production, Zyn shipments increased 1.8% to 2.9 billion pouches. That marks a big improvement from the first quarter when Zyn shipments declined more than 23% to 2.3 billion pouches.
Management had expected the first-quarter Zyn shipment decline after a spike in volume a year ago, when higher-than-expected production capacity allowed the company to replenish inventories.
But that looks to be rectified, with Philip Morris saying it expanded its Zyn product portfolio to remain competitive in the oral nicotine pouch market.
At the end of June, the Food and Drug Administration said Zyn pouches can be marketed with a modified risk claim that says “using ZYN instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.”
Analysts see the regulatory move as a potential boost to Philip Morris’ nicotine pouch business and that it could reaccelerate growth.
Shares of the tobacco giant entered Wednesday up 17% this year, outpacing the S&P 500’s 9.7% gain. The stock has been finding support at its 50-day moving average—around the $182 level—over the past two months.
Philip Morris was a Barron’s stock pick last month.
Morgan Stanley analyst Eric Serotta on Wednesday reiterated his Overweight rating on the shares with a $200 price target.
“We remain Overweight with underlying smoke-free momentum remaining strong, and PM prudently investing to drive future growth,” Serotta wrote.
Write to Kit Norton at [email protected]