Philip Morris: Resilient Earnings but Mounting Smoke-Free Headwinds Justify Neutral (Hold) Stance

Analyst Faham Baig of UBS maintained a Hold rating on Philip Morris, with a price target of $158.00.

Faham Baig has given his Hold rating due to a combination of factors that balance resilient earnings growth with emerging operational headwinds. He expects Philip Morris’s operating performance in 2026 to come in a bit below its medium-term ambitions, as smoke-free products face stiffer competition in the US and Japan, including share pressure in nicotine pouches and weaker momentum in heated tobacco. These pressures are only partially offset by a somewhat better outlook for the traditional combustibles business, helped by lower leaf cost inflation and incremental pricing in certain markets. Nonetheless, he anticipates that a potential multi-year share buyback could still support robust, albeit slightly below-consensus, FX-adjusted EPS growth and that current consensus estimates are unlikely to move significantly, aided by foreign-exchange tailwinds.

At the same time, Baig’s updated modeling of heated tobacco suggests only mid-single-digit volume growth for IQOS, with structural constraints on US adoption given high tar levels in cigarettes, an already crowded smoke-free landscape, and pricing dynamics that limit consumer trade-down incentives. While the US market could still contribute meaningfully to IQOS revenues via higher pricing, the overall growth trajectory is more muted than previously envisioned. Against this backdrop, he notes that Philip Morris’s shares already trade at a premium P/E multiple relative to US staples versus their historical discount, which in his view leaves modest room for valuation expansion. Combined with uncertainties around the timing of key US product launches and tax changes in Japan that could lead to a wider earnings guidance range, these considerations support maintaining a Neutral (Hold) stance rather than recommending the stock as a buy.