MW Philip Morris says black-market cigarettes are a big deal, as sales miss and stock falls

By Tomi Kilgore

Stock is suffering its biggest post-earnings selloff in at least five years as sales suffer a rare miss, with 'illicit' cigarettes costing the EU more than 14 billion euros in tax revenue

Philip Morris International Inc.'s stock was taking a beating Tuesday, after the maker of Marlboro cigarettes and Zyn nicotine pouches reported a rare quarterly sales miss and issued a profit warning, and as the company expressed disappointment in the growth of the illicit cigarette market.

The stock (PM) dropped 8.1% in afternoon trading, putting it on track for the biggest one-day selloff since it tumbled 12.3% on March 18, 2020. It was also headed for the biggest post-earnings decline in at least five years, based on available FactSet data going back to July 2020.

Cigarette shipments for the second quarter fell 1.5% from the same period a year ago to 155.25 billion units, the first decline in more than a year, due primarily to weakness in Indonesia and Turkey, where changes in regulatory requirements led to supply issues.

In Indonesia, "a growing illicit segment" is hurting both the legal industry and Philip Morris's sales, a situation the company expects to continue into the second half of the year.

Black-market cigarettes are also having a big impact on sales in Europe, which accounted for 26.3% of total cigarette shipments.

Chief Financial Officer Emmanuel Babeau said he was "disappointed to observe the lack of a plan to counter the threat of illicit trade," which accounted for 9.2% of total cigarette use in the European Union, and a loss of more than 14 billion euros (more than $16.4 billion) in tax revenue.

While cigarette shipments have been falling over the years, revenue from combustible smoke products was $6 billion in the second quarter, up 2.1% from a year ago, and accounted for 59.4% of total revenue of $10.14 billion.

Smoke-free products saw revenue grow 15.2% to $4.2 billion. Within that business, total shipments were up 28.8%, as nicotine-pouch shipments jumped 48.2%, Snus shipments slipped 0.4%, moist snuff shipments were down 2.2% and other oral SFP shipments dropped 34.2%.

Total revenue rose 7.1% to $10.14 billion, which was below the average analyst estimate compiled by FactSet of $10.32 billion. That marked the first miss in six quarters and just the fourth miss in the past 21 quarters, based on available FactSet data.

Earnings per share for the quarter rose to $1.95 from 1.54, while adjusted EPS, which excludes nonrecurring items of $1.91, beat the FactSet EPS consensus of $1.86. That was the sixth straight bottom-line beat and the 19th beat over the past 21 quarters.

For the third quarter, the company expects adjusted EPS of $2.08 to $2.13, below the current FactSet consensus of $2.14.

The stock has soared 37.9% in 2025, while the S&P 500 SPX has gained 7.3%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 22, 2025 15:28 ET (19:28 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.