Shares in the world’s largest tobacco company by market capitalization dropped about 7% in early New York trade, even as the company raised its full-year profit guidance.
PMI has been faster than its peers to transition from traditional tobacco products to smoking alternatives, such as ZYN, which has grown rapidly to become PMI’s star product.
Cigarettes, however, remain the main engine of PMI’s business, and are in decline. PMI also faces regulatory challenges and tough economic conditions have hit consumers’ wallets.
While PMI’s total sales rose 7.1% to $10.14 billion in the latest quarter, they fell short of analysts’ average estimate of $10.33 billion, as per data compiled by LSEG.
Shipment volumes in the group’s cigarettes business declined 1.5%, whereas volumes in PMI’s nicotine pouch business rose 23.8%. However, ZYN shipments of 190 million cans were behind the 203 million expected by analysts, Bernstein’s Callum Elliot said in a note, adding that PMI’s strong performance in recent quarters has led investors to set high expectations. “These numbers risk being not quite ‘good enough’ for the higher bar that PMI is likely to be held to today,” he wrote.
PMI said it saw steady growth in inhalable alternative nicotine products, notably its flagship heated tobacco device IQOS, across Europe and Japan and big cities such as Jakarta, Mexico and Seoul. The company said this, as well as a “resilient” performance in cigarettes and record net revenues, meant it would raise its full-year guidance.
It now expects an adjusted profit of $7.43 to $7.56 per share for the year, compared with its prior forecast of $7.36 to $7.49.
Its second-quarter adjusted profit of $1.95 per share beat market estimates of $1.86 per share.
The company aims to generate two-thirds of its net revenues from smoking alternatives by 2030.
