Philip Morris International (NYSE:PM) presented its business strategies and growth outlook for the next three years at its Investor Day in Lausanne, Switzerland.
The company outlined robust targets for its compound annual growth from 2024 to 2026:
Net revenue compound annual growth of 6% to 8% on an organic basis. Adjusted operating income compound annual growth of 8% to 10% on an organic basis. Adjusted diluted EPS compound annual growth of 9% to 11%, excluding currency. Gross manufacturing productivities of $1B and SG&A efficiencies of $1B. $36B to $39B in total operating cash flow over the three-year period at prevailing exchange rates. Adjusted net debt to EBITDA of around 2 times by the end of 2026 at prevailing exchange rates. $3.5B to $3.7B in total capital expenditures over the three-year period, with ~75% related to smoke-free products. No share repurchases reflected in the growth targets for the period.
Philip Morris provided 2026 heated tobacco unit shipment volume targets of 180B to 200B units and nicotine pouch shipment volume targets of 800M to 1Bn cans.
The company expects ZYN to drive double-digit net revenue and adjusted OI compound annual growth for its U.S. operations from 2024–2026, including IQOS investments.
PMI also announced its ambition to have more than two-thirds of its total net revenues come from smoke-free products in 2030. This is a significant increase from the company’s previous target of 50% by 2025.
In addition to its growth plans, PMI revised its FY2023 adjusted EPS growth to $6.46–$6.55 above the prior outlook of $6.13–$6.22 and the consensus of $6.22.
Concerning capital allocation, PMI is committed to maintaining its progressive dividend policy while targeting a long-term dividend payout ratio of around 75% of adjusted diluted EPS and contemplating share repurchases once it is confirmed that it is fully on track for a 2-times net debt to adjusted EBITDA leverage target.
For Q3, the company anticipates HTU shipment volume around the middle of the company’s 31B-to-33B-unit range, including typical seasonality in IQOS user and market share growth trends, with an adjusted OI margin that is broadly stable organically versus the prior year period and up sequentially versus the second quarter.
“Our excellent momentum continues, with further strong IQOS performance, resilient combustible trends, and better-than-expected growth for ZYN,” said Jacek Olczak, Chief Executive Officer. “We now expect third-quarter currency-neutral bottom-line growth to exceed our July forecast—a strong performance that almost fully offsets the increased currency headwind, allowing us to target the lower end of our $1.60 to $1.65 prior forecast range for adjusted diluted EPS.”