Philip Morris International: ZYN Demand Drives Earnings Beat

Philip Morris International (PMI) has reported strong earnings for the fourth quarter, driven by robust demand for its nicotine pouch product, ZYN. The company's adjusted earnings per share (EPS) of $1.55 surpassed analysts' expectations of $1.50, while net sales rose 7.3% to $9.71 billion, outpacing estimates of $9.44 billion. PMI's shares surged nearly 8% in pre-market trading following the announcement.

ZYN, a nicotine pouch product acquired as part of PMI's acquisition of Swedish Match, has become a significant growth driver for the company. The product's popularity has surged, particularly among Gen-Z adult males, who have been marketing it through social media and other outlets. The political sparring surrounding ZYN has also added to its appeal among some users.

The strong demand for ZYN has led to increased market penetration in the U.S., with shipments reaching nearly 165 million cans in the fourth quarter of 2024, representing a growth of nearly 42% from the prior year. PMI's share of the nicotine pouch category in the U.S. has also increased, reaching over 74% in the most recent quarter, up 1.3 percentage points sequentially.

PMI's success with ZYN is not limited to the U.S. market. The company's IQOS and ZYN brands have become the second-largest nicotine 'brand' in markets where present, including the #1 position in 11 markets. The company's smoke-free business accounted for 39% of its total net revenues in the first quarter of 2024, with the Eastern Asia, Australia, and PMI Duty Free region accounting for almost two-thirds of revenue, led by Japan and Korea.

The U.S. Food and Drug Administration (FDA) has played a crucial role in PMI's marketing strategies and consumer perception. In January 2025, the FDA granted PMI a formal license to market ZYN in the country, acknowledging that it poses lower risk of serious health conditions due to substantially lower amounts of harmful constituents. This license has allowed PMI to market ZYN more effectively, target specific consumer segments, and enhance its reputation and consumer trust.

PMI's strong earnings performance and the continued growth of ZYN have led analysts to upgrade their recommendations for the company. The majority of analysts now have a 'buy' recommendation for PMI, indicating their confidence in the company's competitive position and growth prospects.