To The Moon

$Philip Morris(PM)$ $British American Tobacco PLC(BTI)$  $Altria(MO)$  

Philip Morris International closed out 2025 with another strong quarter, confirming its smoke-free transition is now driving profitability rather than remaining a future ambition.

📊 Results snapshot

📊 Adj. EPS: $1.70, beat expectations

💰 Revenue: $10.36B, broadly in line

📈 Net Income: $3.37B

🔎 Smoke-free products now drive more than half of quarterly net revenues, with full-year smoke-free shipment volumes rising 12.8% to roughly 179B units, including IQOS HTUs +11% to 155B units, oral nicotine pouches +18.5% (with U.S. ZYN shipments +37% to 794M cans, ~11.9B pouch equivalents), and VEEV volumes surging +102% to 3.3B equivalent units.

Smoke-free net revenues reached $16.9B in FY25, up 15.0% reported and 14.1% organic, while smoke-free gross profit rose 20.3% reported and 18.7% organic, now representing nearly 43% of total gross profit.

I’m seeing earnings structurally shift toward higher-margin smoke-free products as organic net revenue rose 6.5% and organic operating income climbed 10.6%, with PMI achieving prior multi-year CAGR targets ahead of schedule.

🎯 Executive Summary

FY2025 revenue reached $40.6B, up 7.3% YoY, while adjusted currency-neutral EPS rose 14.2%. Smoke-free products now generate nearly 43% of total gross profit, with margins exceeding combustibles.

Management confirmed PMI achieved its three-year CAGR targets in just two years, highlighting accelerated transformation execution.

PMI renewed mid-term targets through 2028, reinforcing long-term visibility:

• 6–8% organic revenue CAGR

• 8–10% operating income CAGR

• 9–11% currency-neutral adjusted EPS CAGR

PMI now serves over 43M estimated adult smoke-free consumers globally across 106 markets, with 27 markets already generating more than 50% of net revenues from smoke-free products. Europe crossed the 50% smoke-free revenue threshold in Q4.

Q4 friction remains:

• U.S. ZYN growth slowed due to inventory destocking

• FY26 EPS growth moderates to 7.5%–9.5% ex-currency

• Japanese excise hikes and tougher comps pressure outlook

Structural thesis remains intact.

🐂 Bull Case

💵 Superior margin profile

Smoke-free gross margins hit 69.5% in FY25, roughly 400 bps above combustibles, structurally lifting profitability.

Cost efficiencies reinforce this expansion, with $1.5B in savings delivered since 2024 and management targeting $2B cumulative savings by 2026.

VEEV shipments doubled year-to-date and now hold leading closed-pod positions in multiple European markets, broadening smoke-free growth beyond IQOS and ZYN.

🥇 ZYN dominance remains

U.S. ZYN shipments rose 37% in FY25 to 794M cans, while Q4 Nielsen data showed U.S. offtake up 23%, helping make nicotine pouches the fastest-growing nicotine segment.

ZYN maintains roughly 40% global pouch share, with strong pricing power intact. International oral volumes surged over 35% outside Nordics, with several markets posting triple-digit growth.

Meanwhile, PMI also delivered its fifth consecutive year of total shipment volume growth, up 1.4%, demonstrating portfolio resilience.

🐻 Bear Case

📉 2026 deceleration

After +14.2% currency-neutral EPS growth in 2025, FY26 guidance slows to 7.5%–9.5%, with reported EPS expected around $8.38–$8.53 including FX tailwinds.

Pressure comes from Japanese excise hikes in April and October, tax increases in India and Mexico, and regulatory uncertainties around U.S. ZYN flavors and IQOS ILUMA approvals. Management expects Q1 to be the softest quarter before growth re-accelerates later in the year.

📦 Inventory and shipment volatility

Q4 shipments fell to 196M cans from Q3’s 206M due to destocking. Approximately 25M surplus ZYN cans remain in distribution channels, expected to normalize during Q1 2026, creating short-term forecasting noise.

💰 Financial Performance Breakdown

Smoke-free products now account for ~41.5% of total revenue and nearly 43% of gross profit, driving organic operating income growth of 10.6%.

Combustible revenues still expanded despite volume declines, supported by pricing power that continues funding the smoke-free transition.

Operating cash flow reached $12.2B in FY25, supporting dividends and enabling deleveraging toward ~2.0x Net Debt to EBITDA by end-2026, with FY26 cash flow targeted around $13.5B.

🛠️ Strategic Headwinds and Execution Risk

Japanese excise taxes on heated tobacco will rise in April and October 2026, potentially impacting category elasticity despite price increases.

U.S. inventory normalization continues, with remaining ZYN surplus clearing through Q1 2026.

Regulatory timing remains important, with pending FDA decisions on ZYN Ultra and IQOS ILUMA approvals potentially affecting U.S. commercialization timing.

Currency volatility shaved $0.28 per share from FY25 EPS, with Q4 transactional losses tied to Ruble and Swiss Franc exposure adding emerging-market sensitivity.

🧠 Analyst and Institutional Sentiment

Institutional positioning remains constructive as PMI continues outgrowing global smoke-free categories, with fund flows rotating toward reduced-risk product leaders.

PMI is increasingly viewed as a diversified nicotine platform rather than a declining tobacco franchise.

📉📈 Technical Setup After Earnings

I’m seeing price action transition from post-earnings volatility into a sustained higher-high, higher-low structure on the 4H timeframe, confirming momentum has shifted firmly back to buyers.

Price is now riding the upper Keltner and Bollinger envelopes, with EMA 13 and EMA 21 stacked cleanly above EMA 55, signalling strong trend alignment. Every pullback since late December has been absorbed above rising moving averages, showing institutional accumulation rather than distribution.

The key observation is volatility expansion following the November base formation near $140, with price now pressing fresh recovery highs around $183–185. Momentum remains constructive as long as pullbacks hold above the $177–178 zone, which now acts as first dynamic support.

A deeper mean-reversion move toward the $172–175 region would still keep the broader uptrend intact, as that area aligns with rising EMA and Keltner mid-channel support.

For now, trend structure remains bullish, with dips being bought rather than rallies sold, keeping institutional participation intact as PMI continues its post-earnings continuation phase.

🌍 Macro and Peer Context

Global nicotine consumption continues accelerating toward reduced-risk alternatives, with PMI holding roughly 76% share of the global heated tobacco category and outgrowing peers in smoke-free adoption.

Diversification across IQOS, ZYN, VEEV, Aspeya wellness and combustibles reduces reliance on any single product or geography, while Marlboro international share sits at historic highs, supporting transition funding.

📊 Valuation and Capital Health

Strong cash generation supports dividends and deleveraging toward ~2.0x leverage by end-2026, strengthening balance sheet resilience.

Although growth moderates in 2026, margin expansion and predictable cash flows continue supporting valuation stability.

⚖️ Verdict and Trade Plan

Constructive. PMI proves its smoke-free future is profitable, scalable and margin-accretive, while combustible pricing continues funding expansion into higher-margin alternatives.

Growth slows in 2026, but structural earnings strength and accelerating cash generation keep longer-term positioning intact.

🏁 Conclusion

Philip Morris continues evolving from a traditional tobacco company into a diversified global nicotine platform with structurally higher margins and durable cash flow.

Growth moderates in 2026, yet the transformation story remains firmly intact.

📌 Key Takeaways

• Smoke-free products now drive profitability

• Margins exceed combustibles, improving earnings quality

• ZYN remains global pouch category leader

• Pricing offsets combustible volume declines

• Cash flow supports dividends and deleveraging

• 2026 headwinds appear cyclical, not structural

📢 Don’t miss out! Like, Repost and Follow me for exclusive setups, cutting-edge trends, and insights that move markets 🚀📈 I’m obsessed with hunting down the next big movers and sharing strategies that crush it. Let’s outsmart the market and stack those gains together! 🍀

Trade like a boss! Happy trading ahead, Cheers, BC 📈🚀🍀🍀🍀

@Tiger_Earnings @Tiger_comments @TigerPicks @TigerStars @TigerWire @Daily_Discussion @TigerObserver