Philip Morris International (PMI) continues to make waves on the financial scene, with its stock achieving record highs, driven largely by the soaring demand for its Zyn nicotine pouches. Recently, shares reached $131.97, marking the highest level ever for the company, which has been pivoting to establish itself as the leader among smoke-free product manufacturers.
At the heart of this impressive performance is Zyn, the U.S. market leader for oral nicotine pouches. PMI's third-quarter results for 2024 revealed their shipments of Zyn increased by over 41% compared to the same time last year. With demand showing no signs of abatement, PMI’s CFO, Emmanuel Babeau, has indicated expectations for shipments to match demand by the year’s end, hinting at the strong foothold Zyn is establishing.
But it’s not just domestic affairs; Zyn is making significant international strides as well, with sales soaring nearly 70% overseas as the brand extends its reach to new markets like Greece and the Czech Republic. Currently available in 30 markets worldwide, Zyn symbolizes PMI's broader strategy to reduce reliance on traditional combustible tobacco products.
Analysts share this optimistic outlook, with Matthew E. Smith from Stifel issuing a 'Buy' rating for PMI and raising his price target to $145 from $138. He notes the surging demand for smoke-free items like Zyn and IQOS as primary growth drivers for the company moving forward. Smith projects 9.5% earnings per share (EPS) growth for 2025, bolstered by 8% organic revenue growth, heavily influenced by Zyn’s increasing market share both domestically and across Europe.
PMI has also recently adjusted its predictions, estimating U.S. Zyn shipments for 2024 will fall between 570 million and 580 million cans, which marks a significant 10 million increase on the lower end of the projections. This renewed forecast aligns with the company's confidence about Zyn's role within its overall strategy to diversify away from cigarettes.
The surge of Zyn reflects a more significant transformation within the tobacco industry, as companies turn their attention toward smoke-free alternatives. PMI's bold move to invest $600 million to establish new production capabilities for Zyn at its state-of-the-art facility in Colorado speaks volumes about its long-term ambitions and commitment to catering to this growing marketplace.
After years of stagnation, PMI is now being viewed as something of a growth stock, reviving spirits among investors eager to witness the company pivot away from traditional tobacco. Remarkably, PMI shares have surged nearly 40% within 2024 alone, marking one of the company’s best performances since it split from Altria back in 2008. With the trend line for demand for Zyn appearing steadfastly upward, PMI is solidifying its position as a major player within the future smoke-free market.
CEO Jacek Olczak expressed palpable enthusiasm during the earnings call, noting, “We delivered exceptionally strong performance, with record quarterly net revenues and earnings per share.” Emphasizing continued momentum across all areas, Olczak highlighted the reacceleration of IQOS sales, alongside strong growth and resilience from Zyn volumes, and combustible performance.
While PMI is seeing great success with Zyn, it is also launching new initiatives, such as recently debuting its heated tobacco product IQOS in Austin, Texas, through its 'Be the First' pilot program. Through this initiative, adults aged 21 and older living within specific areas of the city can sign up for the opportunity to be among the first consumers to receive and experience IQOS once available. This demonstrates PMI’s commitment not just to zyn but also adapting to shifting consumer preferences through innovative product offerings.
All of this adds up to indications of not just short-term success but also long-term viability for Philip Morris International as it aligns more closely with the current market demand for reduced-risk tobacco products. The strong Q3 numbers and the optimistic projections seem to suggest consumers are not only willing to explore smoke-free options, but they may also be moving away from traditional smoking altogether.
So what's next for PMI? If the trends hold, the company looks poised to expand its footprint domestically and globally, which could lead to excited investors and consumers eager for new, less harmful tastes from the tobacco giant. The gamble on smoke-free products may well represent the future of the industry, making PMI’s strategy and performance something to keep an eye on.
