Philip Morris Stock At $145: Buy, Hold, Or Sell?


Philip Morris (NYSE: PM) delivered a strong Q4 performance, with revenue of $9.7 billion and adjusted earnings per share of $1.55, exceeding the consensus estimates of $9.4 billion and $1.50, respectively. The outperformance was primarily attributable to better price realization. Furthermore, the company’s optimistic forecast surpassed market expectations. This led to a surge in PM’s stock price. PM stock, with 60% returns since the beginning of 2024, has outperformed the S&P 500 index, up 28%. Strong market uptake of IQOS, now Philip Morris’s highest revenue generating brand, is a key driver of positive investor sentiment.

How Did Philip Morris Fare In Q4?

Philip Morris’ Revenue of $9.7 billion reflected a 7.3% y-o-y growth, driven by a 5% contribution from better price realization and 2% from volume/mix. The company saw a 1.1% growth in cigarette volume, a 5.1% rise in heated tobacco units, and a large 25% jump for its smoke-free products. The company continues to benefit from increased demand for its IQOS and ZYN brands. Not only did Philip Morris post higher sales, its operating margin expanded by 260 bps to 36.3% in Q4. Higher revenues clubbed with margin expansion resulted in the bottom line of $1.55 up 14% y-o-y.

Looking forward, Philip Morris expects its sales to rise between 6% and 8% in 2025 and operating income growth between 10.5% and 12.5%. The company’s forecast of $7.11 in adjusted earnings per share at the mid-point of the provided range topped the street estimates of $7.03.


What Does This Mean For PM Stock?

Amid a Q4 beat and optimistic outlook, PM shares surged 11% post the results announcement. While PM’s stock has demonstrated less volatility than the S&P 500 over the last four years, its growth during that period has been far from steady. Given the current uncertain macroeconomic environment around rate cuts and trade wars, could PM underperform the S&P over the next 12 months — or will it see a strong jump? We estimate Philip Morris’ Valuation to be $128 per share, reflecting around 10% downside from its current levels of around $145. At its current levels, PM stock is trading at 20x forward expected earnings of $7.10 in 2025. The 20x figure is higher than the stock’s average P/E ratio of 16x seen over the last five years. While a slight rise in valuation multiple seems justified given the expansion of its heated tobacco products, we think PM stock is now fully valued.

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