iQOS boosts Philip Morris International’s quarterly profit, revenue

Philip Morris International beat second-quarter earnings and revenue estimates while hiking its full-year forecast as its new tobacco products gain momentum.

PMI sells Marlboro cigarettes and other brands around the globe. The tobacco giant is trying to pivot away from cigarettes and toward new products, namely iQOS, which heats tobacco instead of burning it. In the quarter, PMI said cigarette volume fell 3.6%, while volume for its new heated tobacco products spiked 37% in the quarter.

The company reported second-quarter net income of $2.31 billion, or $1.49 per share, up from the $2.19 billion, or $1.41 the company reported in the year-ago quarter. When litigation expenses related to Canadian lawsuits, asset impairment and exit costs, among other items, PMI earned $1.46 per share, above the $1.32 per share Wall Street expected.

PMI posted revenue of $7.7 billion, down 0.3% from the year-ago quarter yet still better than the $7.37 billion analysts polled by Refinitiv expected.

PMI raised its full-year adjusted earnings forecast to $5.14 per share, up from the previously guided adjusted earnings per share of $5.09. Analysts were forecasting annual earnings of $5.16 per share.

Shares of the company rose about 6% Thursday.

“Building on our encouraging start to the year, we delivered another strong quarter that continues to demonstrate the soundness of our strategies and the quality of our execution,” PMI CEO André Calantzopoulos said in a statement.

iQOS’ performance helped boost PMI’s results. Revenue for reduced-risk products, which iQOS is categorized in, totaled $1.53 billion in the quarter. Anaysts had expected $1.24 billion, according to estimates from StreetAccount.

PMI said Russia was a bright spot for iQOS in the quarter. Reduced-risk product revenue in Eastern Europe, which includes Russia, jumped to $182 million in the quarter from $65 million in the year-ago quarter. PMI said it increased spending in the region, primarily in Russia, to bring iQOS to more markets.

Piper Jaffray analyst Michael Lavery called momentum “broad-based,” pointing to market share gains in Germany, Italy, Spain. Japan, PMI’s most successful iQOS market to-date, also showed improvement.

The U.S. Food and Drug Administration cleared iQOS for sale in the U.S earlier this year. Altria will sell the device in the U.S., with plans to introduce it in Atlanta, Georgia, this summer.

PMI said it would up its spending on iQOS this year by a third, from $300 million to $400 million.