Marlboro maker Philip Morris reports revenue miss, but strong sales of cigarette alternatives

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Philip Morris International’s Marlboro brand cigarettes are arranged for a photograph in Shelbyville, Kentucky, on Oct. 2, 2015.
Luke Sharrett | Bloomberg | Getty Images

Philip Morris International on Thursday reported quarterly earnings that topped Wall Street’s expectations but revenue that missed estimates, as sales for its heated tobacco and oral nicotine products remain strong.

Here’s what the company reported compared to what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

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  • Earnings per share: $1.67 adjusted vs. $1.62 expected
  • Revenue: $9.14 billion vs. $9.17 billion

The tobacco company, which makes Marlboro cigarettes, raised its full-year adjusted earnings guidance to a range of $6.05 to $6.08 a share, which it said would represent growth of 10% to 10.5%.

For the quarter ending Sept. 30, Philip Morris posted revenue of $9.14 billion, compared to the year-ago revenue of $8.03 billion, a 13.8% increase.

Meanwhile, the company’s operating income rose to $3.37 billion, an increase of 13.5%.

CEO Jacek Olczak said the quarter was the first time the company has topped $9 billion in quarterly net revenue. He cited IQOS, its line of heated tobacco products, and its Zyn oral nicotine pouch as growth drivers.

In recent years, Philip Morris has pivoted away from its core market for traditional cigarettes as demand for combustible tobacco products wanes and regulation becomes stricter in some markets. The company is throwing its weight behind smoke-free products and respiratory medicines instead.

Heated tobacco shipment volumes, which include electronic cigarettes, increased 18% in the quarter.

While shipment volume for its traditional cigarettes fell 0.5%, net revenue for the category jumped 4.3%, due to higher pricing.

The company’s Zyn nicotine pouch unit saw shipment volumes grow 65.7%. Olczak said it “surpassed our expectations yet again.”

Zyn nicotine pouches are tobacco-free oral products touted by the company as a cleaner, more discreet way to consume nicotine. It’s a part of the company’s growing effort to focus more on health care and wellness, despite pushback from the larger public health sector on the damage done by cigarette smoking.

Philip Morris acquired Zyn last year with its purchase of Swedish Match. It was one of several deals that aimed to diversify its portfolio away from cigarettes.

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