Brett Schafer, The Motley Fool

Sun, Jun 1, 2025, 3:35 AM5 min read

• Philip Morris International is seeing growing demand for its alternative nicotine products and is getting a boost from a depreciating dollar.

• The company is still harvesting a ton of cash flow from its legacy cigarette business.

• The stock is more expensive than previously but can still deliver sold returns for shareholders.

• 10 stocks we like better than Philip Morris International ›

The stock market has been choppy in 2025. Dipping and soaring seemingly each month, the S&P 500 index is basically now flat this year. Philip Morris International (NYSE: PM) has gone straight up and to the right. Shares of the international nicotine giant have posted a 50% total return so far in 2025, making it one of the best-performing large-cap stocks of the last few months and crushing the index returns.

It is a heavy dividend payer and benefiting from multiple tailwinds that should drive earnings much higher in the years to come. But is the stock still a buy today?

Philip Morris International's returns are a cumulation of bets made over the past 10 years. The company rightfully saw that cigarette usage was declining around the world and pivoted its business to other nicotine products that are seeing strong consumer adoption. In the heat-not-burn category it has the leading brand called Iqos with 77% volume share in the markets it operates, making it the dominant player in the space. In nicotine pouches it owns the leading brand in Zyn with similar market share characteristics.

Combined, Iqos and Zyn have changed the complexion of Philip Morris' business. Last quarter, 42% of the company's revenue came from smoke-free products, and 44% of gross profit. Higher gross profits from alternative nicotine products shows the better unit economics these brands have compared to cigarettes, which is a high bar. This is why Philip Morris' overall revenue has inflected higher in the last few years to $38 billion over the last 12 months.

On top of its lead in new nicotine products, Philip Morris International is benefiting from a weaker U.S. dollar. The Dollar Index has fallen from around 110 to under 100 to start 2025, which shows the U.S. dollar depreciating compared to other currencies. Philip Morris International does not operate in the United States except with its Zyn brand (and with Iqos in the future), meaning that a depreciating dollar will help it earn more in revenue in U.S. dollar terms. Wall Street has anticipated this boost to revenue, adding more fuel to the stock price to start the year.