QS Research · Michael Burry's Scion Capital analyst template · 2006
Philip Morris International Inc. (PM)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case 0% · downside -31% · upside +5%
At $197.88 PM already trades at N28 28.9x TTM P/E and N26 18.5x EV/EBITDA, a clear premium to MO at 15.9x and 13.4x; the base case is today's multiple on TTM EBITDA/net income, i.e. N9 $308.43B market cap or N1 $197.88, or 0%. The downside case at MO's 13.4x EV/EBITDA on N14 $18.72B gives $135.9/share, -31.3%, while the upside at TPB's 30.4x P/E on N15 $10.68B gives $208.3/share, +5.3%. The business is genuinely improving, with smoke-free above 40% of Q3 2026 revenue and FCF of N18 $13.60B, but the market already pays for that mix shift and the risk/reward is negatively skewed. The rule does not justify a short because the base case is not -30%; this is a watch for multiple compression or a better entry.
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 sells cigarettes (607.4B units in FY2025) and smoke-free products (179.1B equivalent units, +12.8%) through distributors, wholesalers, direct-to-retail and owned e-commerce/retail in roughly 170 markets; revenue grew from $28.69B (FY2020) to $40.65B (FY2025) with operating income $11.67B to $14.89B, so the growth is operating, not a one-off. Between the FY2020 and FY2025 annual reports the company moved from six regional segments and 76.1B heated-tobacco units to four geographic segments, 155.1B HTUs, smoke-free sales in 106 markets, and a third reorganisation effective January 1, 2026 into International Smoke-Free, International Combustibles and U.S. Capital intensity rose with the portfolio shift (capex $602M in FY2020 to $1.57B in FY2025), and equity remains negative (-$9.99B at FY2025).
- ✓ 2. Competitive advantage
PM's advantage rests on owned brands and IP (Marlboro outside the U.S., IQOS/HEETS/TEREA, ZYN, VEEV) plus a patent portfolio that is material in aggregate but not dependent on any single patent, and on a scale-driven cost structure: gross profit rose from $19.12B (FY2020) to $27.28B (FY2025) on revenue of $28.69B to $40.65B, with operating income of $14.89B in FY2025 versus a $11.56B trough in FY2023. Operating cash flow has been $9.81B-$12.23B every year FY2020-FY2025 against capex of only $602.0M-$1.57B, so the profit is cash-backed, not accounting. The moat is not unassailable: it competes with Altria, BAT, JTI and Imperial plus state-owned and local producers, and a premium-weighted portfolio is structurally exposed to price-based excise regimes.
- ✓ 3. 10-Q takeaways
Q3 2026 (three months ended September 30) net revenues were $11,438M vs $10,845M in Q3 2025 and operating income $4,866M vs $4,263M, with marketing, administration and research costs down to $2,993M from $3,058M. PMI-attributable net earnings still fell to $3,313M from $3,478M (diluted EPS $2.12 vs $2.23), but the drop is non-operating: equity investments/securities swung to an $86M loss from $345M income a year ago, plus a $74M pre-tax Dutch pension settlement loss. The nine-month picture is the same story — PMI net earnings $8,568M vs $9,207M carry a $511M RBH equity investment impairment and a $330M securities loss vs $926M income in 2025, while operating income rose to $13,289M from $11,519M. Nine-month operating cash flow rose to $10,445M from $7,524M, helped by $682M of German pension refunds and a $933M inventory release.
- ✓ 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
- ○ 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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