(Reuters) - Philip Morris International (NYSE:PM) raised its annual profit forecast on Tuesday, banking on higher cigarette prices and its growing nicotine pouch brand ZYN while trimming the outlook for its core heated tobacco business.
The world's top tobacco company by market value has put heated tobacco device IQOS at the centre of its effort to grow revenues from smoking alternatives, but lower-than-expected shipments disappointed some investors last year.
ZYN has emerged as a bright spot thanks to booming growth, while regular hikes to cigarette prices have helped offset consistent volume declines across the industry.
PMI upgraded its forecasts for both annual revenues and profit, with higher ZYN shipment volumes a key driver.
"We are on track for a strong 2024," CEO Jacek Olczak said, flagging strong momentum across PMI's business.
Shares in PMI were up 2% in premarket trading after it also beat expectations for second-quarter revenue.
IQOS and other heated tobacco products gained users in the second quarter, with new product launches in places like Japan and Indonesia helping drive in-market sales volume growth of 10.2%, in line with expectations.
However, PMI said it expected annual heated tobacco in-market sales volume growth to be lower than previously forecast, flagging a greater-than-anticipated impact from a ban on flavoured heated tobacco in the European Union.
Mark Giambrone, a portfolio manager at Barrow Hanley, a sub-adviser to American Beacon's Large Cap Value Fund which invests in PMI, said this did not overshadow its results and forecasts.
"The quarter was excellent," he said.
PMI expects full-year adjusted earnings per share of between $6.67 and $6.79, compared with its earlier forecast of $6.55 to $6.67. Its second-quarter revenue of $9.47 billion beat an $9.18 billion average analyst estimate, LSEG data shows.