Philip Morris’ third quarter results outpaced Wall Street’s expectations for both revenue and profit, but the market responded negatively, reflecting concerns over the company’s evolving cost structure and investment intensity. Management cited the robust expansion of its smoke-free portfolio—led by IQOS, ZYN, and VEEV—as a key driver of growth, with the brands collectively surpassing industry growth rates. Chief Financial Officer Emmanuel Babeau attributed strong performance to “outstanding volume growth for all three of our flagship brands,” noting that these gains offset declining cigarette volumes and supported margin expansion. However, higher commercial spending—especially related to aggressive promotional activities in the U.S. for ZYN—contributed to investor caution.

Is now the time to buy PM? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Philip Morris’s Q3 Earnings Call

• Eric Serrano (Morgan Stanley) asked about the sustainability of ZYN’s growth following heavy Q3 promotions and whether October’s scanner data weakness was in line with expectations. CFO Emmanuel Babeau explained that post-promotion, growth remained strong and emphasized the need for a new “normal” level of promotional activity to support category expansion.
• Matt Smith (Stifel) questioned if the $100 million U.S. promotional investment for ZYN was a recurring or one-time expense. Babeau clarified it was a one-time cost related to relaunch activities, but noted that ongoing promotional spending would normalize at a higher level than previous quarters.
• Bonnie Herzog (Goldman Sachs) inquired about the scope of stepped-up U.S. investment and its division between ZYN and IQOS. Babeau confirmed significant investments in both brands would continue, reflecting the strategic importance of the U.S. market and ongoing preparation for IQOS launches.
• Faham Baig (UBS) probed the impact of heightened competition in Japan’s heated tobacco market on IQOS’s growth trajectory. Babeau acknowledged more intense competition but expressed confidence in IQOS’s strong brand and stable market share.
• Damian McNeil (Deutsche Numis) asked about the visibility of expected inventory adjustments for ZYN and IQOS, and the sustainability of premium pricing for ZYN in the U.S. Babeau stated inventory normalization was anticipated in Q4, though timing remained uncertain, and reiterated the intention to maintain ZYN’s premium positioning.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will focus on (1) the pace of smoke-free product adoption and the effectiveness of new marketing campaigns, (2) regulatory developments—particularly FDA decisions on nicotine pouches and IQOS product approvals, and (3) how well Philip Morris manages inventory normalization and margin pressures amid continued investment. Execution against these priorities will signal the company’s progress in transforming its business model.

Philip Morris currently trades at $153.12, down from $158.07 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

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