Philip Morris (PM) Earnings on Deck: Can Smoke-Free Tobacco Drive Another Beat?

Tobacco giant Philip Morris (PM) is set to report their Q3 FY2025 earnings Tuesday, October 21, before market openPM has had a great year so far, up over 30% year-to-date and beating consensus EPS estimates in six straight calls, dating back to April 2024Revenue mix and U.S. expansion will be two of the most critical factors headed into this callThis YearPhilip Morris has had a great year to this point, trading up over 30% year-to-date and beating consensus earnings per share (EPS) estimates in all three of their calls this calendar year. Growth has primarily been driven by ever-increasing demand for their smoke-free tobacco products, and the tobacco giant also raised their forward revenue guidance in each of their first two FY2025 earnings reports.In their Q2 report in late July, Philip Morris also gave their full first-half breakdown, which indicated that 41% of their first-half net revenue came from smoke-free products, such as iQOS, ZYN, and VEEV. Additionally, they reported having 41 million adult users across 97 markets as of June 30 of this year.This CallPhilip Morris will hold their Q3 earnings call on Tuesday, October 21, before market open. Analyst consensus estimates call for an EPS of $2.09 and revenue of $10.6 billion for the quarter. The company’s framing aligns with these estimates, as they internally expect an adjusted EPS of $2.08-$2.13, per their last report.Outside of the core numbers and forward guidance, there are four other core factors that could move PM after this earnings report. The first of these is the most glaring: smoke-free tobacco momentum. Updates on iQOS growth and market share, particularly in the United States, will be pivotal, as will any updates on the progression of broader regulatory authorization of marketing for iQOS products.The second major factor for PM is U.S. ZYN sales and regulation; the FDA is reviewing Modified Risk applications for 20 ZYN products. Any further information on that review, its timeline, and its implications on marketing matters for growth and margins.The third such factor is Philip Morris’s margins, pricing, and revenue mix. The company has seen double-digit EPS growth in previous quarters on the back of their pricing and diverse revenue mix; any guidance on headwinds or input costs could move shares.Lastly, investors will have their eyes and ears open for any regulatory headlines. Beyond the aforementioned U.S. regulatory environment, Philip Morris is an international company, and the regulations in other nations also matter. For instance, Italy’s antitrust department has opened a probe into “smoke-free” marketing claims; any information on the company’s future messaging in Europe could impact sentiment.BeyondPhilip Morris investors also have a number of factors to keep in mind beyond this upcoming earnings report. One such component is the company’s shifting targets for revenue mix; their broader goal is to have two-thirds of revenue generated from smoke-free products by 2030. Reaching their checkpoints as they move toward that goal over the next 4+ years will be critical.Another future component for Philip Morris is the expansion of their international products into the U.S., such as gaining authorization for iQOS distribution. ZYN capacity and marketing constraints in the U.S. will also shape the company’s path into 2026 and beyond.Lastly, the company’s broader investments and cash returns will be key. Their 2025 plan called for more than $11 billion in operating cash flow and about $1.5 billion in capital expenditure, including ZYN investments. Any future updates, in this call or otherwise, inform investors of the company’s dividend and buyback capacity.The options market implies an expected move of $10 in either direction after this earnings call, which is significant for a $157 stock. There’s no way to know for sure which direction that move will come in, but anyone taking on short-term positions centered around this call should do so with an abundance of caution.Gus Downingis host of the tastylive Network showRisk and Reward. @GainsByGusFor live daily programming, market news and commentary,visittastyliveor the YouTube channelstastylive(for options traders), andtastyliveTrendingfor stocks, futures, forex & macro.Trade with a better broker,open a tastytrade accounttoday. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.