Philip Morris Q2 Earnings Beat Estimates, Organic Sales Rise 7.6% Y/Y

Net revenues of $11,192 million increased 10.4% on a reported basis and 7.6% on an organic basis year over year. Revenues beat the Zacks Consensus Estimate of $10,556 million. The increase in organic revenues was backed by favorable pricing in the international combustibles business, with additional support from favorable volume/mix due to strong international smoke-free volumes, partly offset by an unfavorable international combustibles mix.

PM’s Quarterly Performance: Key Metrics and Insights

Total shipment volumes increased 2.5% to 205.2 billion units in the second quarter.

Adjusted gross profit increased 11.5% (up 8.7% on an organic basis) to $7,665 million, while adjusted operating income rose 12.4% to $4,773 million.

Decoding PM’s Segment Performance

Net revenues in the International Smoke-Free segment grew 14.2% (up 11.8% on an organic basis) to $3,877 million, attributed to a favorable volume/mix from higher HTU and e-vapor volumes, alongside favorable pricing driven by HTUs. Adjusted gross profit rose 17.1% (up 14.6% organically). Shipment volume grew 8% to 44.7 billion units, led by broad-based growth across markets, particularly Taiwan, Romania and Greece.

In the International Combustibles segment, net revenues increased 9.8% (up 6.4% organically) to $6,459 million, driven by favorable pricing, partly offset by an unfavorable geographic mix as growth in developing markets more than offset declines in Europe. Adjusted gross profit increased 11.5% (up 8% organically). Shipment volume increased 1.1% to 156.9 billion units, with growth in Turkey, Indonesia and Egypt.

Revenues in the U.S. segment fell 0.7% (down 0.9% on an organic basis) to $856 million, due to broadly stable ZYN revenues, declines in the cigar business and unfavorable timing effects in the Wellness business. Adjusted gross profit decreased 9% (down 8.9% organically).  Shipment volume increased 1.8% to 3.5 billion units.

Philip Morris: Other Updates

The company ended the quarter with cash and cash equivalents of $5,999 million, long-term debt of $42,366 million and a total shareholder deficit of $6,657 million.

Sneak Peek Into PM’s Outlook

Adjusted EPS for 2026 is now envisioned in the $8.26-$8.41 range, indicating 9.5-11.5% growth. Earlier, the metric was expected in the $8.36-$8.51 per share range, implying 10.9-12.9% growth. Adjusted EPS, excluding currency, is likely to be in the $8.11-$8.26 band, indicating a year-over-year increase of 7.5-9.5%. For 2026, Philip Morris expects reported EPS in the band of $7.19-$7.34 compared with $7.26 in 2025. Earlier, the metric was expected in the $7.56-$7.71 per share range.

Overall shipment volumes are expected to remain stable to slightly increase, driven by continued high-single-digit growth in smoke-free products, while cigarette volumes are projected to decline 2-3%, compared with the previous expectation of around 3%.

For 2026, PM still expects net revenues to increase 5-7% on an organic basis. The operating income on an organic basis is likely to rise 7-9%.

This Zacks Rank #4 (Sell) company expects an operating cash flow of around $13.5 billion in 2026. Capital expenditures are likely to be in the band of $1.4 billion to $1.6 billion, primarily implying investments to support the smoke-free business.

For the third quarter of 2026, adjusted EPS is projected in the range of $2.20 to $2.25.

The company’s shares have gained 11.1% in the past three months compared with the industry’s growth of 15.9%.

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The Zacks Consensus Estimate for Hormel Foods’ current fiscal-year sales and earnings indicates growth of 1.4% and 9.5%, respectively, from the prior-year reported levels.

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