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Why Philip Morris International Stock Was Climbing Today

Shares of Philip Morris International (PM 3.83%) were moving higher today after the international tobacco giant posted strong results in its first-quarter earnings report, driven by growth in its IQOS heated tobacco sticks.

The stock closed up 3.8% on the news.

IQOS is heating up Philip Morris’ stock

Philip Morris continued to make progress toward smoke-free products making a majority of its revenue as they represented 39% of revenue in the first quarter. IQOS, its heated tobacco stick product leading its transition to its smoke-free future, reported better than 10% market share in Europe for the first time, and IQOS’s market share gained more than 3 percentage points of share in Japan to reach 29%.

The company reported 20.9% in heated tobacco unit shipment volume to 33.1 billion, while cigarettes were down just 0.4% to 143.2 billion. Total shipment volume, including oral products, was up 3.6% to 180.5 billion, a bullish sign for future growth.

Overall revenue jumped 9.7% to $8.8 billion, with organic revenue, which excludes divestitures, acquisitions, and currency exchange, up 11%. That result beat analyst estimates at $8.47 billion.

Further down the income statement, gross margin improved thanks to price hikes and a higher-margin profile of smoke-free products. Adjusted earnings per share jumped 8.7% to $1.50, which topped expectations at $1.41. In constant currency, adjusted earnings per share (EPS) was up 23% to $1.70.

CEO Jacek Olczak said, “Strong smoke-free momentum continues with rapid underlying volume progression and accelerating organic net revenue and gross profit growth.”

What’s next for Philip Morris

Looking ahead, management continued to expect strong growth in the heated tobacco category, forecasting 14%-16% growth and overall organic revenue growth of 7%-8.5%. On the bottom line, the company called for adjusted EPS of $6.55-$6.67, excluding currency, up 9%-11% and ahead of the consensus at $6.37.

The results should give investors confidence that its IQOS strategy is paying off. Philip Morris stock continues to look like a good value, especially when factoring in its 5.5% dividend yield.

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