Can Philip Morris Rely on Pricing to Drive 2025 EPS Growth?

Philip Morris International PM continues to lean on pricing as a key earnings driver. The company delivered a strong first quarter of 2025, with adjusted earnings per share (EPS) rising 12.7% year over year to $1.69. Pricing contributed 6 percentage points to organic revenue growth of 10.2%, supported by an 8.3% increase in combustible pricing and around 3% in smoke-free products, excluding devices. The company has raised its full-year EPS forecast to $7.36-$7.49. The question is whether pricing alone can sustain that momentum.

Management pointed to continued pricing strength in markets like Turkey, Poland and Germany. However, it also noted that gross pricing and negative geographic mix are expected to moderate over the remainder of the year. In the smoke-free category, gross margins expanded 670 basis points to surpass 70%, now standing more than five points above combustibles at the current product and geographic mix. ZYN, a key contributor to smoke-free profit growth, saw shipment volumes rise 63% in the quarter, reinforcing the segment’s scale and strategic importance.

Even so, Philip Morris delivered a 180-basis-point gross margin boost from pricing alone, reflecting the effectiveness of its pricing strategy. While pricing gains may be less pronounced in the second half, Philip Morris emphasized continued investments behind its smoke-free growth. With volume and mix improvements already visible in the first quarter, the company appears positioned to support earnings growth through a combination of pricing and product performance.

Philip Morris Stands Apart as Competitors Feel Pricing Strain

Altria Group MO reported a 10.8% rise in net price realization for combustibles, which supported operating income growth despite steep volume declines. Yet, MO is facing consumer pressure, with many smokers trading down to discount brands, limiting pricing flexibility. In oral nicotine, Altria Group’s on! posted 18% shipment growth alongside higher retail prices, but category competition and cost-conscious behavior remain visible headwinds.

Turning Point Brands TPB saw explosive growth in its modern oral segment, with pouch sales increasing nearly tenfold year over year. However, this growth came with mix-driven margin pressure. Turning Point Brands’ gross margin declined 220 basis points and it acknowledged the need for further investment to scale brands and improve profitability. With rising freight and tariff costs also in play, Turning Point Brands’ pricing power remains limited without additional volume leverage.

PM’s Price Performance, Valuation & Estimates

Shares of Philip Morris have gained 4.9% in the past month compared with the industry’s growth of 5.1%.

From a valuation standpoint, PM trades at a forward price-to-earnings ratio of 23.19X, up from the industry’s average of 15.64X.

The Zacks Consensus Estimate for PM’s 2025 earnings implies year-over-year growth of 13.7%, whereas its 2026 earnings estimate indicates a year-over-year uptick of 11.7%.

PM stock currently holds a Zacks Rank #2 (Buy). 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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