Philip Morris International Earnings: HTU Volume and Pricing Continue to Drive Growth in Q3

Philip Morris International, or PMI, reported third-quarter results that were in line with our forecasts, supported by strong growth in the recently acquired Swedish Match business, continued strong price increases in cigarettes, and positive portfolio volume growth. The pricing performance, in particular, supports our wide economic moat rating, which remains in place. We also retain our $103 fair value estimate and believe that PMI's leadership in heated tobacco, demonstrated by the 18% volume growth achieved in the segment in the third quarter, justifies a valuation premium to competitors. The market may be disappointed by management's lowering of its full-year guidance, but we believe most of the drivers of that change are transitory in nature and do not affect the underlying value of the business.