January 16, 2025

Asset Control and Quality

Investment for the Future

Is Philip Morris International (NYSE:PM) a Long Term Investment? Examining Its Growth and Valuation

Is Philip Morris International (NYSE:PM) a Long Term Investment? Examining Its Growth and Valuation

Philip Morris International Inc (NYSE:PM) is planning for the future by steadily switching to smoke-free options like IQOS and ZYN. Gaining popularity, the business is taking advantage of changing customer tastes and government support for lower-risk products. People are confident in the company’s growth, which is reflected in its high price. However, at current levels, the stock may not give new investors much upside.

Philip Morris International is a compelling long-term hold for those betting on the success of its innovation-led strategy, but caution is warranted for value-oriented buyers seeking immediate returns.

Philip Morris International (NYSE:PM) recorded tremendous performance in Q3 2024 with revenues of $ 9.9 billion, this being an 8.4% growth from the same period in 2023. Much of this performance was attributable to the fact that the company was very focused on smoke-free products that now constitute 38% of total net revenue. A key factor in this success is IQOS, PMs core HnB (Heat-Not-Burn) product that shows further growth of market presence. The figures are not simply their revenues; they signify a main shift towards a future with low or no cigarettes.

Taking a deeper look into the bottom line, making use of the adjusted diluted EPS, we have $1.91, which means that it has been growing by 14.4% year on year in the same quarter. As a result, excluding currency impacts, the growth rate is they more compelling 18%. This robust EPS growth tells more about PMs operational performance, particularly its capacity to contain inflationary costs and compliance costs while reporting profits. That the company has invested in low risk products is clearly bearing fruits putting Philip Morris in a vantage position in the changing face of the tobacco industry.

In terms of volume there is a clear divide on product type and the corresponding market shares tell the story well enough. It reported a 1.3% growth in shipments of traditional cigarettes which suggested that the company continued to perform well in its legacy category despite a challenging environment in the international market. However, the real stand out of the quarter was the heated tobacco units (HTUs) which increased by a phenomenal 8.9%. This double-digit growth points to the good progress in the growth of smoke-free products within the key markets comprising of Japan and Europe. This seems to be an indicator that PM is capable of increasing HTU shipment at this size, meaning they are gaining market share within the continuously expanding reduced-risk products category.

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