Philip Morris International Inc.

Analyst thesis

Our recommendation is based on:

• Growing volumes and a rising revenue share from Philip Morris International’s (PM) smoke‑free product segment — now 43% of net revenues in 1Q26, up from 42% in 1Q25 — are helping to offset risks associated with the global decline in cigarette volumes.

• Re-entry into the US market through Swedish Match, focused primarily on smoke-free products, although exposure remains limited at approximately 6% of net revenues in 1Q26.

• Stable topline growth with expectations of high-single-digit diluted adjusted earnings per share growth after currency impacts in FY26. The company expects a 3% decline in cigarette volumes, in line with changing consumer behaviour and a shift towards more health-conscious nicotine consumption methods, putting pressure on traditional combustibles. Although the contribution from smoke-free products continues to increase and partially mitigates the structural decline in traditional combustible volumes, we anticipate some pressure on earnings and margins.

• Although PM has stable topline growth and anticipates earnings growth while remaining a stable dividend payer and defensive counter, P:E valuations remain elevated, leading us to a hold recommendation.