Philip Morris Aims for $2B Cost Savings by 2026: How Close Is It?

Philip Morris International Inc. (PM) is halfway through the three-year cost-savings program and remains on track to achieve its goals. The company aims to deliver $2 billion in gross cost efficiencies between 2024 and 2026, and by mid-2025, it has already realized more than $1.2 billion. This includes more than $500 million captured in the first half of the year through manufacturing and back-office optimization initiatives.

The savings are making a visible impact on profitability. Philip Morris delivered an adjusted operating income margin expansion of 290 basis points in the first six months of 2025, including 250 basis points on an organic basis. In the second quarter, organic margin improvement accelerated to 300 basis points, up from 200 basis points in the first quarter, indicating strong operational execution.

Philip Morris is continuing to advance initiatives aimed at streamlining operations and boosting productivity. These efforts span manufacturing, organizational processes and footprint optimization. In the second quarter, the company recorded restructuring charges of $243 million related to its manufacturing footprint optimization in Germany.

At this stage, Philip Morris’ progress shows it is on track with the cost-saving plan. The halfway point indicates that the $2 billion target by 2026 is achievable. The company expects the efficiency gains to continue supporting margins while allowing it to keep investing in the product portfolio and future initiatives.

Philip Morris Peer Check

Altria Group, Inc. (MO) continues to emphasize efficiency to protect profitability. In the second quarter of 2025, Altria’s smokeable products segment’s adjusted operating companies income jumped 4.2%, driven by higher pricing, lower per-unit settlement charges and reduced costs, partly offset by lower shipment volume. These results underscore Altria’s ability to manage expenses and leverage pricing to support margins, even as volumes remain under pressure.

Turning Point Brands, Inc. (TPB) is pursuing a similar path, though with a smaller scale and a different product mix. In the second quarter of 2025, Turning Point Brands delivered gross margin expansion of 310 basis points year over year, reaching 57.1%. Turning Point Brands is also making continued investments in its sales and marketing, which contributed to an increase in SG&A for the quarter. These strategic investments are aimed at strengthening the company’s long-term growth prospects.

PM’s Price Performance, Valuation & Estimates

Shares of Philip Morris have lost 7.7% in the past month against the industry’s growth of 0.1%.

From a valuation standpoint, PM trades at a forward price-to-earnings ratio of 20.67X, up from the industry’s average of 15.23X.

The Zacks Consensus Estimate for PM’s 2025 and 2026 earnings per share has inched up by a cent each in the past 30 days to $7.50 and $8.39, respectively.

Philip Morris currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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