PM US S&P 500Russell 1000 Earnings call · transcribed from the recording
Philip Morris International (PM) · Q3 2026 results and valuation
Share price: $196.35 · 2026-11-11
Philip Morris International is a consumer goods company that sells cigarettes and smoke-free products, including heat-not-burn, nicotine pouches, and e-vapor products. The company operates in international markets and provides products for adult smokers and users of nicotine-containing products. It also manages a wellness business focused on oral consumer offerings. Source: 10-K annual report (2026-02-06)
Results Q3 2026 vs Q2 2026 · previous quarter · published 21 Oct 2026 and 22 Jul 2026
Net income up 17.6% on the previous quarter. Management sounded very upbeat, though noticeably less so answering analysts.
1 · Numbers
+17.6%
Net income vs Q2 2026
Net income 3.31B vs 2.82B
Revenue +2.2%
Against the same quarter last year (Q3 2025) it is −4.7%, so the move on last quarter looks seasonal or timing-related rather than a trend.
2 · How management spoke
Very upbeat
Among the most upbeat of all company calls
Answers to analysts: typical, but clearly less so than the script.
Last call it was different: the answers were more upbeat than the script.
3 · What stood out
Philip Morris International expects to generate a record level of approximately $13.5 billion in operating cash flow.
Valuation
Is Philip Morris International undervalued?
Reverse DCF. Free cash flow from the last full fiscal year (2025-12-31), grown for 10 years, discounted back, plus a terminal value. “Implied growth” is the rate the current price assumes.
At 8.6% growth a year (3-year revenue growth), the model's fair value is $118.09 a share — the stock trades 66% above it. Today's price assumes 14.4% growth a year.
Current price
$196.35
close of 2026-11-11
Market implies growth of iThe yearly free-cash-flow growth, for the next 10 years, that today’s share price already assumes. If you believe the company grows faster than this, the stock is cheap under this model; slower, and it is expensive.
+14.4% for 10 yrs
Fair value / share
$118.09
Buy below
$88.57
Price vs fair value
Overvalued 66%
Price vs buy-below price
Overvalued 122%
Read between the lines
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Figure
Higher category share, robust pricing, and efficient execution drove organic net revenue growth of plus 5.2% and gross profit growth of plus 7.4%, supporting plus 140 basis points of organic gross margin expansion.
Source quote
“Higher category share, robust pricing and efficient execution drove organic net revenue growth of plus 5.2% and gross profit growth of plus 7.4%, supporting plus 140 basis points of organic gross margin expansion.”
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Figure
US net revenues increased by almost 23% and gross profit by plus 24% with gross margins expanding organically by plus 60 basis points to 64.4%.
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Figure
The smoke-free portfolio share increased to 62%, outgrowing the comparable industry by approximately one percentage point as a result of the multi-category strategy.
Source quote
“Importantly, our smoke-free portfolio continues to outgrow the comparable industry by approximately one percentage point, with our share increasing to 62%, reflecting the increasing strength of our multi-category strategy.”
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Key theme
The company expects to generate a record level of approximately $13.5 billion in operating cash flow as a testament to its strong cash flow generation.
Source quote
“We also expect to generate a record level of approximately $13.5 billion in operating cash flow, testament to our strong cash flow generation.”
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Figure
Adjusted OI exceeded $5 billion for the first time and the adjusted OI margin reached close to 45% in Q3.
Source quote
“Q3 adjusted OI exceeded $5 billion for the first time, while our adjusted OI margin reached close to 45%.”
4 more
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Figure
Veeve increased its shipment growth in eVapor to plus 62% this quarter.
Source quote
“In eVapor, Veeve continued its outstanding progress with a step up in shipment growth to plus 62%.”
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Key theme
The company expects high single-digit growth in smoke-free adjusted IMS volumes and shipments for the year, though shipments are subject to year-end inventory movements.
Source quote
“We continue to expect high single-digit growth in smoke-free adjusted IMS volumes and shipments for the year, with the latter subject to year-end inventory movements.”
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Figure
E-vapor shipments grew by plus 62%, demonstrating the increasing scale and importance of the multi-category portfolio and Viv's role within it.
Source quote
“E-vapor shipments grew by a remarkable plus 62%, demonstrating the increasing scale and importance of our multi-category portfolio and Viv's role within it.”
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Figure
Veeve shipment volumes increased by over 68% to 4.0 billion equivalent units year-to-date due to momentum in switching to the product.
Source quote
“Switching to Veeve, whose momentum remains very strong, year-to-date shipment volumes increased by plus 68% to 4.0 billion equivalent units.”
Tone
How upbeat the language was, compared with other companiesiTone counts positive minus negative finance words, adjusted for length. Executives mostly speak positively, so the labels compare each call with every company's latest call: “typical” is the middle third, “very upbeat” the top tenth, “cautious” the bottom tenth.. Dot: Q3 2026. Ring: Q2 2026.
Management sounded noticeably less positive answering analysts than in its prepared script — one of the biggest drops of any company call. Scripts are polished in advance; a drop under questioning often marks the topics analysts pressed on, so the answers deserve a closer read than the script.
Sentences that drove the tone
“The strong share performance and robust pricing drove another quarter of excellent profitability, with international combustible gross profit increasing by plus 9.8% in Q3 and plus 7.4% year-to-date.”
“The strong underlying momentum of our smoke-free business continued with ICO's HTU shipments at the high end of our expectations and accelerated growth fundamentals across all three of our flagship...”
“We continue to expect another year of high quality, best-in-class volume, sales and profit growth as we continue to invest behind our leading smoke-free platforms to drive long-term value.”
Full figures
USD · SEC EDGAR XBRL (10-Q, period end 2026-09-30)
| Metric | Q3 2026period end 2026-09-30 | Q2 2026period end 2026-06-30 | Change | Q3 2025 | YoY |
|---|---|---|---|---|---|
| Revenue | 11.44B | 11.19B | +2.2% | 10.85B | +5.5% |
| Gross profit | 7.85B | 7.66B | +2.5% | 7.36B | +6.7% |
| Operating income | 4.87B | 4.53B | +7.4% | 4.26B | +14.1% |
| Net income | 3.31B | 2.82B | +17.6% | 3.48B | −4.7% |
| EPS | 2.12 | 1.80 | +17.8% | 2.23 | −4.9% |
| P/E today 28.9 | 27.9 | 26.0 | +1.9 | 29.4 | −1.5 |
Topics
Most discussed now
- This reflects the durability of Philip Morris International's model, supported by category-leading brands, strong pricing power…
- The first wave of expansion comprises the higher nicotine moist range of ZIN Ultra and an expanded flavor lineup for...
- New Philip Morris International guided you to another half a point that is coming from disruptions which are one-off things that have…
- The strong underlying momentum of Philip Morris International's smoke-free business continued with ICO's HTU shipments at the high end of…
- Philip Morris International's strong operational performance supported better-than-expected adjusted diluted EPS growth of plus 6%…
Faded since Q2 2026
- Fading IQOS adjusted in-market sales volume increased by +5%, including expected transitory headwinds from the April excise increase in Japan…
- Fading Philip Morris International's combustible performance was above its expectation in an especially strong quarter, with growing volumes, very…
- Dropped Supported by a rich product pipeline and improving regulatory clarity, Philip Morris International believes it is the right moment to…
- Fading An excellent Q2 with organic growth of +6.4% in net revenue and +8% in gross profit, driven by resilient volume...
Latest announcements
Official filings, newest first. Summaries are generated from each filing and its attachment; every figure is checked against the source.
- Results of operations · SEC 8-K
Philip Morris International reported net revenues of $11.4 billion, up 5.5% year over year, with adjusted diluted EPS growing 5.4% to $2.36.
- Regulation FD disclosure · SEC 8-K
Philip Morris International increased its regular quarterly dividend by 8.8% to $1.60 per share, up from $1.47 per share, resulting in an annualized rate of $6.40 per share.
- Regulation FD disclosure · SEC 8-K
PMI raised its 2026 adjusted diluted EPS forecast to $8.35 - $8.50, representing a growth of 10.7% to 12.7% including favorable currency impacts.
- Regulation FD disclosure · SEC 8-K
Philip Morris International raised its 2026 full-year adjusted diluted EPS forecast to a range of $8.35 to $8.50, representing a projected increase of 10.7% to 12.7% compared to $7.54 in 2025.
- Regulation FD disclosure · SEC 8-K
Philip Morris International entered into a contract manufacturing arrangement for combustible cigarettes with Altria's operating company, with the first shipments expected to begin in early 2027.
- Results of operations · SEC 8-K
Philip Morris International reported net revenues of $11.2 billion, up 10.4% year over year, with adjusted diluted EPS of $2.20, which grew 15.2% compared to the previous year.
- Director or officer change · SEC 8-K
Massimo Andolina will become Group Chief Financial Officer on August 1, 2026, replacing Emmanuel Babeau, who will serve as Strategic Advisor until March 31, 2027.
- Other events · SEC 8-K
On June 29, 2026, Philip Morris International Inc. prepaid €1.0 billion (approximately $1.1 billion) of its senior unsecured term loan facility, leaving €1.5 billion (approximately $1.7 billion) outstanding.
Catalyst calendar
management-stated targets — from the latest earnings call; plans, not promises.
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over the second half of this year
align the portfolio value proposition
Source quote
“This performance was supported by the ongoing rollout of new variants as we invest significantly in the accelerated expansion of our product offer and align the portfolio value proposition over the second half of this year.”
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for the year
high single-digit growth in smoke-free adjusted IMS volumes and shipments
Source quote
“We continue to expect high single-digit growth in smoke-free adjusted IMS volumes and shipments for the year, with the latter subject to year-end inventory movements.”
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for the full year
H2U shipment growth to be slightly below adjusted IMS growth
Source quote
“We now expect H2U shipment growth to be slightly below adjusted IMS growth for the full year, with the Q3 dynamic of adjusted IMS growing faster than shipments to continue in Q4, notably due to the in-year facing impact of price changes in Japan.”
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fourth quarter
impact of restructuring of certain distribution terms
Source quote
“These headwinds were partially mitigated in Q3 by the impact of restructuring of certain distribution terms I mentioned earlier, which we do not expect to be significant in the fourth quarter.”
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For the full year
SG &A growth in relation to net revenues
Source quote
“For the full year, we expect SG &A to grow broadly in line with net revenues as we continue to work on our back office costs while strongly increasing commercial investments behind our growth platforms and consumer-facing initiatives across the world.”