Philip Morris International PM posted third-quarter 2026 results on Oct. 21, with both top and bottom lines beating the Zacks Consensus Estimate and rising year over year.
PM has a Zacks Rank #3 (Hold) and a Momentum Score of A. Philip Morris has gained about 23% year to date and approximately 13% since the start of the second half of 2026.
However, PM shares initially fell 4.8% following the earnings release amid concerns over rising costs stemming from escalating conflicts in the Middle East and Ukraine, but later rebounded about 3.8% during the same trading session.
Q3 Performance Snapchat
PM posted quarterly adjusted earnings of $2.36 per share, which increased 5.4% year over year and beat the Zacks Consensus Estimate of $2.30 by 2.61%. Excluding currency effects, adjusted earnings jumped 5.8% year over year.
Net revenues of $11,438 million increased 5.5% on a reported basis and 7.1% organically year over year. Revenues beat the Zacks Consensus Estimate of $11,409 million by 0.26%. Growth was driven by favorable combustible pricing and smoke-free product demand.
Gross profit rose 6.7% and 8.3% organically, supported by strong combustible pricing, economies of scale, and a favorable smoke-free product (SFP) mix. Operating income saw double-digit growth in the reported quarter, rising 14.1% from the year-ago quarter.
Total shipment volumes increased 0.6% to 206.2 billion units, supported by a 2.7% increase in SFP shipments during the quarter. SFP’s E-Vapor unit’s shipments rose 61.6% in the quarter from the previous year. Management now expects total cigarette and smoke-free product shipment volumes to grow in 2026, compared with its previous forecast of broadly stable to slightly growing volumes.
Smoke-Free Products Account for a Growing Share of Revenue
The smoke-free business (SFB) of the world’s largest tobacco company accounted for more than 40% of total net revenues in the third quarter and approximately 42% in the first nine months of the year.
Net revenues in the International Smoke-Free segment increased 0.7%, up 3.4% organically, to $3,867 million, reflecting favorable volume/mix from higher heated tobacco unit (“HTU”) and e-vapor volumes, alongside favorable HTU pricing.
Geopolitical Tensions Continue to Weigh on PM
As quoted in the company’s earnings release, while the ongoing conflict in the Middle East has had a manageable impact on the group overall, its effects on PM’s business have become more pronounced.
Energy-related inflation contributed to additional cost pressures in the third quarter, and the company expects these pressures to intensify slightly in the fourth quarter as a larger share of higher input prices takes effect.
The long-term implications of the ongoing conflict remain uncertain, making it difficult to assess its broader effects on consumers and the global cost environment. Ongoing disruptions in Ukraine, including strikes affecting supply chains and logistics, are creating operational challenges for PM. The company expects these disruptions to weigh on its operating income this year.
ETF to Consider
Here, we have highlighted some ETFs with significant exposure to Philip Morris.
Hexis Active Nicotine Engagement ETF NICO
Hexis Active Nicotine Engagement ETF has 23.79% exposure to PM. NICO charges an annual fee of 0.70%.
iShares U.S. Consumer Staples ETF IYK
iShares U.S. Consumer Staples ETF has 11.51% exposure to PM. IYK charges an annual fee of 0.37%.
Global X PureCap MSCI Consumer Staples ETF GXPS
Global X PureCap MSCI Consumer Staples ETF has an exposure of 9.85% to PM. GXPS has an expense ratio of 0.15%.
VanEck Consumer Staples TruSector ETF TRUO
VanEck Consumer Staples TruSector ETF has an exposure of 7.59% to PM. TRUO charges an annual fee of 0.14%.
Consumer Staples Select Sector SPDR Fund XLP
Consumer Staples Select Sector SPDR Fund has 6.39% exposure to PM. XLP charges an annual fee of 0.08%.
First Trust Morningstar Dividend Leaders Index Fund FDL
First Trust Morningstar Dividend Leaders Index Fund has an exposure of 6.39% in PM. FDL charges an annual fee of 0.43%.
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Philip Morris International Inc. (PM): Free Stock Analysis Report
State Street Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
First Trust Morningstar Dividend Leaders ETF (FDL): ETF Research Reports
iShares U.S. Consumer Staples ETF (IYK): ETF Research Reports
Global X PureCap MSCI Consumer Staples ETF (GXPS): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).