QS Research · Michael Burry's Scion Capital analyst template · 2006
Philip Morris International Inc. (PM)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +0% · downside -20% · upside +12%
I use section 13's TTM net income to common base ($10.68B) and 1.55866B shares, but value it at PM's own 28.9x P/E (N31) rather than the peer-multiple range, because Rule 1 permits a lower/higher multiple only with a non-valuation rerating catalyst and none is cited. At 28.9x, $10.68B of TTM net income is $308.65B of equity value, or $198.0/share, essentially today's $197.88 (+0.1%). A 20% earnings decline gives $8.54B × 28.9 = $246.9B, or $158.4/share (-20.0%), while 12% earnings growth gives $11.96B × 28.9 = $345.7B, or $221.8/share (+12.1%). The stock is a high-quality smoke-free compounder but the premium multiple leaves no deep-value margin of safety and the near-term headwinds are earnings-level, not a clear short catalyst, so I watch rather than buy or short.
Key numbers
- Share price: $197.88
- Market cap: $308.43B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $43.14B
- EV / EBITDA (TTM): 18.5x
- P/E (TTM): 28.9x
The 15 boxes
- ✓ 1. Long-form business notes
PM is a cigarette-and-smoke-free consumer goods company that sells in roughly 170 cigarette markets and, at 12/31/2025, had smoke-free products on sale in 106 markets; FY2025 revenue was $40.65B versus $28.69B in FY2020, with operating income of $14.89B versus $11.67B and net income to common of $11.32B versus $8.04B (S24). FY2025 shipment volume was 786.5B equivalent units, of which 179.1B were smoke-free (+12.8%) and 607.4B cigarettes (-1.5%) (S22). Between the two 10-Ks the reporting structure changed from six operating segments (FY2020) to four geographic segments (as of 12/31/2025) to three segments effective 1/1/2026 (International Smoke-Free, International Combustibles, U.S.) (S22, S23). Total international market share was 29.2% in 2025 versus 29.0% in 2024, with cigarette share slipping to 23.4% from 23.7% and HTU share rising to 5.8% from 5.3% (S22).
- ✓ 2. Competitive advantage
PM's clearest durable advantage is brand and intellectual property: it owns the trademark rights to Marlboro outside the U.S., HEETS, IQOS, IQOS ILUMA, TEREA, VEEV and ZYN, plus a material patent portfolio. Scale is large and growing: FY2025 revenue was $40.65B, gross profit $27.28B, operating income $14.89B and operating cash flow $12.23B. The margin record shows gross margin roughly stable near 67% from FY2020 to FY2025, but operating margin slipped as revenue grew faster than operating income, and the FY2025 jump in net income to common should not be read as operating margin expansion. Competition is intense from Altria, BAT, Japan Tobacco, Imperial Brands and new SFP entrants, and regulation can erode the SFP advantage.
- ✓ 3. 10-Q takeaways
Q3 2026 was a record revenue, gross-profit and operating-income quarter: net revenues $11,438M (up 5.5% reported, 7.1% organic), gross profit $7,854M (+6.7% / 8.3% organic) and operating income $4,866M (+14.1% / 10.5% organic), with growth in both smoke-free and combustibles. Reported diluted EPS fell 4.9% to $2.12 while adjusted diluted EPS rose 5.4% to $2.36, the gap being non-cash equity-investment fair-value and pension one-offs, not operations. Cash generation was strong (nine-month operating cash flow $10,445M vs $7,524M) and inventory fell $1,152M from year-end. The quarter's only capital-return news is an 8.8% dividend increase to $1.60 per quarter; the release's full-year adjusted EPS forecast was updated for currency only, and no numeric forecast appears in the text provided.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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