Philip Morris Beats Earnings Expectations. The Stock Is Falling Anyway.

The company posted strong earnings but fell short of analysts’ revenue expectations. (Daniel Acker/Bloomberg)

Shares of Philip Morris International were falling Tuesday even after the company reported earnings that topped expectations. Weaker-than-expected revenue and a slowdown in shipment growth may be weighing on the stock.

The owner of brands like Marlboro and Zyn posted second-quarter adjusted earnings of $1.91 a share, above Wall Street’s consensus call for $1.86, according to FactSet. Net revenue came in at $10.14 billion, rising 7.1% from last year but falling short of analysts’ forecasts of $10.32 billion.

The company also lifted its full-year profit forecast. Management expects adjusted earnings of between $7.43 and $7.56 a share for 2025, up narrowly from previous guidance of $7.36 to $7.49.

Shares were dropping 7.7% on Tuesday to $166.63. Coming into the session, the stock had climbed 50% so far this year and 65% over the last 12 months.

Investors may have been focused on a slowdown in volume growth. While sales of smoke-free products remained strong, year-over-year growth in the volume of oral pouch shipments, which include the company’s flagship Zyn brand, slowed to 23.8% in the second quarter from 27.2% in the first quarter.

Philip Morris now expects total cigarette and smoke-free shipment volume to rise around 1% from 2024, while previous forecasts called for up to 2% growth. And the company didn’t upgrade its estimates for Zyn shipments, noted Rae Maile of U.K. firm Panmure Liberum.

“There is plenty to like about the performance, and who does not like another upgrade to estimates?” Maile wrote in a research note Tuesday. “The problem is not with the company but with over-estimation with respect to some of those drivers of growth especially among the noisy ZYN fanboys.”

Panmure has a Hold rating on Philip Morris and a $175 price target.

Philip Morris needs strong performance in pouches and other smoke-free products to compensate for the global, industry-wide decline in cigarette smoking. After cigarette shipments grew 1.1% from 2024 in the first quarter, the company reported a 1.5% drop from last year in the second quarter.

Write to Nate Wolf at nate.wolf@barrons.com