Philip Morris International: Smoke-Free Growth Fuels a Bull Run—Is There Room Left to Run?

Philip Morris International (PM) has been one of the standout performers in 2025, with its stock surging to an all-time high amid record-breaking financial results and strategic momentum. But with shares up 42.7% year-to-date (YTD) through April 25, investors are asking: Is this a peak, or does the story still have legs? Let’s dissect the data to find out.

The Numbers That Ignited the Rally

PM’s Q1 2025 earnings delivered a masterclass in execution, driven by its transition from cigarettes to higher-margin smoke-free products. Key highlights include:
- Revenue growth: Organic revenue rose 10.2% to $9.3 billion, with smoke-free products now contributing 42% of total net revenue.
- Adjusted EPS: Jumped 17% to $1.76, fueled by margin expansion and cost discipline.
- Volume growth: Smoke-free shipments surged 12–14%, with Zyn nicotine pouches leading the charge at 53% volume growth globally.

The results pushed PM’s stock to its highest level ever, outpacing the S&P 500 by a wide margin:

The Engine Behind the Growth: Smoke-Free Dominance

PM’s shift to smoke-free products is the core of its success. Here’s how each segment is contributing:

Zyn Nicotine Pouches: A U.S. Breakthrough

Zyn’s U.S. shipments hit 202 million cans in Q1, a 53% YoY jump, with international sales rising at the same pace. The company upped its full-year forecast to 800–840 million cans, signaling confidence in capturing a growing nicotine pouch market.

IQOS: Global Expansion and Regulatory Crossroads

IQOS heated tobacco units (HTUs) grew 11.9% globally to 37.1 billion units. Japan’s market share hit 32.2%, while Europe and emerging markets like Mexico and Indonesia are expanding. However, U.S. expansion hinges on FDA approval of its IQOS ILUMA device, which PM acquired from Altria in 2023.

VEEV E-Vapor: Doubling Down on Innovation

VEEV’s shipments more than doubled in Q1, driven by European market penetration. This segment’s growth underscores PM’s commitment to diversifying its nicotine portfolio.

Strategic Moves and Financial Fortitude

PM isn’t just riding trends—it’s engineering them. Key initiatives include:
1. Market Expansion: Testing IQOS in Austin, Texas, with plans to scale if FDA approval comes through.
2. Dividend and Valuation: A 3.2% forward dividend yield and a forward P/E of 23 (vs. a 5-year average of ~24) suggest the stock remains attractively priced.
3. Financial Discipline: A target of 2x net debt/EBITDA by end-2026 ensures balance sheet resilience.

The Risks on the Horizon

While PM’s fundamentals are strong, challenges remain:
- FDA Approval Uncertainty: IQOS’s U.S. launch timeline depends on regulatory approval, which could delay growth.
- Currency Headwinds: A $0.10 EPS headwind from currency fluctuations is already baked into 2025 guidance.
- Market Saturation: Smoke-free products face competition in mature markets like Japan and Europe.

Is It Too Late to Buy?

Despite the YTD rally, PM’s valuation metrics and long-term trajectory suggest there’s still room to run. Consider these factors:
- Valuation: A PEG ratio under 0.4 implies the stock is undervalued relative to its growth rate.
- Growth Pipeline: Smoke-free products are still in early adoption phases in many markets, with Zyn and IQOS targeting ~12% of the global nicotine pouch market.
- Defensive Industry Position: Tobacco stocks often perform well in volatile markets, and PM’s dividend provides stability.

Conclusion: PM’s Transition Is Just Beginning

Philip Morris International’s Q1 results underscore its transformation into a leader of next-generation nicotine products. With smoke-free revenue now over 40% of total sales and a 200.26% 5-year stock return, the company has clearly mastered its pivot.

While the stock’s YTD surge may deter some, its valuation, dividend, and expansion opportunities—especially in the U.S.—make dips worthwhile entry points. The risks are real, but PM’s execution to date suggests it can navigate them.

Investors seeking a defensive, high-growth equity with a dividend kicker should view PM as a buy on weakness. The smoke-free revolution isn’t over—PM is just getting started.

Final Note: Past performance does not guarantee future results. Always conduct your own research or consult a financial advisor before making investment decisions.