Philip Morris International Inc. (NYSE:PM)

The provision for income taxes exhibited a fluctuating pattern over the five-year period. Current tax expense generally increased, while deferred tax benefits transitioned from small benefits to substantial benefits, ultimately impacting the overall tax provision.

Current Tax Expense

Current tax expense demonstrated an increasing trend overall, rising from US$2,689 million in 2021 to US$3,584 million in 2025. A slight decrease was observed between 2021 and 2022, followed by consistent increases in subsequent years. The largest year-over-year increase occurred between 2023 and 2024, with an increase of US$464 million.

Deferred Tax Benefit

The deferred tax benefit experienced significant volatility. Initially a small benefit of US$18 million in 2021, it became a substantial benefit, peaking at a negative US$847 million in 2025. The benefit increased in magnitude as a negative value from US$234 million in 2022 to US$330 million in 2023, before decreasing to US$116 million in 2024 and then increasing significantly to US$847 million in 2025. This suggests changes in temporary differences or the valuation of deferred tax assets.

Provision for Income Taxes

The provision for income taxes followed a less pronounced, but still notable, pattern. It decreased from US$2,671 million in 2021 to US$2,244 million in 2022, then increased to US$2,339 million in 2023 and US$3,017 million in 2024. A decrease was observed in 2025, with the provision settling at US$2,737 million. The interplay between the increasing current tax expense and the fluctuating deferred tax benefit significantly influenced the overall provision.

The increasing current tax expense likely reflects increased taxable income. The substantial and growing deferred tax benefit suggests the recognition of future tax benefits, potentially related to loss carryforwards or other deductible temporary differences. The overall trend indicates a complex tax position, requiring further investigation into the underlying drivers of these changes.

The effective income tax rate exhibited fluctuations over the five-year period. While the U.S. federal statutory tax rate remained constant at 21.00%, the effective income tax rate demonstrated variability, suggesting influences beyond the standard corporate rate.

Effective Income Tax Rate - Overall Trend

The effective income tax rate began at 21.80% in 2021, decreased to 19.30% in 2022, increased to 22.40% in 2023, rose further to 24.70% in 2024, and then decreased to 19.70% in 2025. This pattern indicates a lack of consistent direction, with periods of both increase and decrease.

Effective Income Tax Rate - 2021-2022

A notable decrease in the effective income tax rate occurred between 2021 and 2022, moving from 21.80% to 19.30%. This suggests a potential benefit from tax credits, changes in the geographic mix of earnings, or adjustments related to deferred tax assets or liabilities.

Effective Income Tax Rate - 2022-2024

From 2022 to 2024, the effective income tax rate increased significantly, rising from 19.30% to 24.70%. This substantial increase could be attributed to factors such as a shift in the proportion of profits earned in higher-tax jurisdictions, the expiration of tax benefits, or changes in tax laws impacting the company’s tax obligations.

Effective Income Tax Rate - 2024-2025

The effective income tax rate experienced a decrease from 24.70% in 2024 to 19.70% in 2025. This reversal of the prior trend may indicate the realization of tax planning strategies, a change in the geographic distribution of income, or the impact of discrete tax events.

The variations in the effective income tax rate, when compared to the constant statutory rate, highlight the importance of considering factors beyond the standard corporate tax rate when assessing the company’s tax position. Further investigation into the specific drivers of these fluctuations would be necessary to fully understand the underlying causes.

The composition of deferred tax assets and liabilities exhibits significant fluctuations over the five-year period. A notable trend is the increasing reliance on net operating loss carryforwards to generate deferred tax assets, coupled with a growing valuation allowance against those assets. Deferred tax liabilities consistently remain negative and are dominated by intangible assets, property, plant, and equipment, and unremitted earnings.

Deferred Tax Assets - Components

Accrued postretirement and postemployment benefits and accrued pension costs represent a consistent, though fluctuating, portion of deferred tax assets. Accrued pension costs demonstrate considerable volatility, peaking in 2023 before declining substantially in 2025. Inventory-related deferred tax assets are initially small, increasing significantly in 2024 and 2025. The most substantial driver of deferred tax asset growth is the increase in net operating loss, tax credit, and other carryforwards, rising from US$408 million in 2021 to US$1,542 million in 2025. Investments in equity interests and foreign exchange items contribute to deferred tax assets beginning in 2024, with increasing values each year. Other deferred tax assets also show an increasing trend, particularly in 2025.

Valuation Allowance

The valuation allowance against deferred tax assets has increased substantially throughout the period, moving from a negative US$239 million in 2021 to a negative US$1,709 million in 2025. This increase suggests a growing uncertainty regarding the realization of the deferred tax assets, particularly those related to net operating loss carryforwards. The significant jump in the valuation allowance in 2024 indicates a reassessment of the recoverability of these assets.

Deferred Tax Liabilities - Components

Intangible assets consistently represent the largest component of deferred tax liabilities, becoming more negative over time, from US$-591 million in 2021 to US$-1,936 million in 2025. Property, plant, and equipment also contribute to deferred tax liabilities, though to a lesser extent, and become less negative over the period. Unremitted earnings represent a significant and growing liability, moving from US$-206 million in 2021 to US$-811 million in 2025. Foreign exchange fluctuations also contribute to deferred tax liabilities, with a notable negative value in 2021 and 2024. A small liability related to other items is present in 2022.

Net Deferred Tax Position

The net deferred tax position transitions from a net asset of US$169 million in 2021 to a net liability of US$818 million in 2025. This shift is driven by the combination of increasing deferred tax liabilities and the growing valuation allowance against deferred tax assets. The net deferred tax position is negative for the majority of the period, indicating an overall deferred tax liability.

In summary, the deferred tax asset position is increasingly reliant on future profitability to realize the value of net operating loss carryforwards, as evidenced by the growing valuation allowance. Deferred tax liabilities are primarily driven by intangible assets and unremitted earnings, and are consistently negative. The overall trend indicates a shift from a net deferred tax asset to a net deferred tax liability position over the analyzed period.

The deferred tax asset balance decreased from 2021 to 2022, then exhibited volatility with increases in 2023, 2024, and a significant rise in 2025. Conversely, the deferred tax liability balance increased substantially from 2021 to 2023, followed by a slight increase in 2024 and a decrease in 2025.

Deferred Tax Assets

The deferred tax asset position began at US$895 million in 2021. A notable decrease to US$603 million was recorded in 2022. Subsequent years showed recovery, with values of US$814 million, US$940 million, and reaching US$1,247 million in 2025. This indicates a potential shift in the realizability of temporary differences generating these assets, or changes in tax planning strategies.

Deferred Tax Liabilities

Deferred tax liabilities demonstrated a consistent upward trend from 2021 to 2024. Starting at US$726 million in 2021, the balance rose to US$1,956 million in 2022, then to US$2,335 million in 2023, and US$2,517 million in 2024. A decrease to US$2,065 million was observed in 2025. This pattern suggests increasing taxable temporary differences over the period, with a possible reversal or reduction in 2025.

The net deferred tax position (liabilities less assets) has generally widened from 2021 to 2025, although the rate of widening slowed in 2025 due to the larger increase in deferred tax assets compared to liabilities. The fluctuations in both deferred tax assets and liabilities warrant further investigation into the underlying temporary differences and their associated tax effects.

Net Deferred Tax Position

In 2021, net deferred tax liabilities were US$169 million (US$726 - US$895 = -US$169, presented as a liability). By 2024, this had increased to US$452 million (US$2,517 - US$940). In 2025, the net deferred tax liabilities decreased to US$818 million (US$2,065 - US$1,247). This indicates a growing overall tax obligation related to future taxable amounts, with a slight reduction in the final year.

The financial information reveals adjustments made to reported figures, primarily concerning the removal of deferred tax assets and liabilities. These adjustments impact total assets, total liabilities, stockholders’ deficit, and net earnings attributable to the company over the five-year period from 2021 to 2025. The magnitude of these adjustments appears to be relatively consistent year-over-year, suggesting a systematic approach to their application.

Total Assets

Reported total assets increased significantly from 2021 to 2022, then experienced moderate growth through 2023, followed by a decrease in 2024, and a subsequent increase in 2025. The adjusted total assets follow a similar pattern, consistently lower than the reported figures by approximately US$900 million in 2021, decreasing to approximately US$800 million in 2025. This consistent difference indicates a regular reduction due to the removal of deferred tax items.

Total Liabilities

Reported total liabilities demonstrate an increasing trend throughout the period, with the largest increase occurring between 2021 and 2022. Adjusted total liabilities also increase, mirroring the reported trend, but are consistently lower by a similar magnitude to the asset adjustments – approximately US$700 million in 2021, increasing to approximately US$1,065 million in 2025. This suggests the deferred tax adjustments also impact the reported liability position.

Stockholders’ Deficit

The reported stockholders’ deficit fluctuates over the period, showing a decrease in 2022, followed by increases in 2023 and 2024, and a decrease in 2025. The adjusted stockholders’ deficit exhibits a similar pattern, but the adjustments consistently increase the magnitude of the deficit. The difference between reported and adjusted figures varies, but generally remains within a range of US$100 to US$600 million.

Net Earnings

Reported net earnings attributable to the company remain relatively stable between 2021 and 2023, decrease in 2024, and then increase substantially in 2025. The adjusted net earnings follow the same trend, consistently lower than the reported earnings by a relatively small amount, ranging from approximately US$10 million to US$847 million. The largest difference occurs in 2025, coinciding with the largest reported net earnings.

Overall, the adjustments consistently reduce reported asset and liability values, and modestly reduce reported net earnings. The consistent nature of these adjustments suggests they relate to a specific, recurring item, likely related to deferred tax accounting. The increasing difference in the liability adjustments over time warrants further investigation to understand the underlying drivers.

The financial metrics demonstrate a generally consistent pattern between reported and adjusted values following the removal of deferred tax impacts. While the adjustments are typically modest, they offer a slightly refined view of underlying performance. A notable decline in profitability metrics is observed between 2021 and 2023, followed by a partial recovery in 2024 and 2025.

Profitability

Reported net profit margin decreased from 29.00% in 2021 to 22.21% in 2023 before increasing to 27.92% in 2025. The adjusted net profit margin mirrors this trend, moving from 28.95% to 21.27% and then to 25.83% over the same period. The difference between reported and adjusted margins remains consistently small, generally within 0.25 percentage points annually. This suggests that deferred taxes have a limited impact on reported profitability.

Asset Utilization

Reported total asset turnover decreased from 0.76 in 2021 to 0.51 in 2022, then showed modest improvement to 0.54 in 2023 and 0.61 in 2024, before settling at 0.59 in 2025. The adjusted total asset turnover follows a similar pattern, with slightly higher values each year. The adjustments consistently indicate a marginally more efficient use of assets, though the overall trend remains consistent with the reported figures.

Return on Assets

Reported return on assets (ROA) declined from 22.06% in 2021 to 11.96% in 2023, then increased to 16.40% in 2025. The adjusted ROA exhibits the same trajectory, starting at 22.51%, falling to 11.60%, and rising to 15.46%. The adjustments result in a slightly higher ROA in each year, again indicating a minor positive impact from excluding deferred tax effects. The largest difference between reported and adjusted ROA is observed in 2021 and 2023.

The absence of reported and adjusted values for financial leverage and return on equity prevents a comprehensive assessment of the impact of deferred taxes on these metrics. However, the analysis of the available ratios suggests that the removal of deferred tax considerations leads to only incremental changes in the observed financial performance, indicating that deferred taxes are not a primary driver of the reported results.

The period under review demonstrates fluctuations in both reported and adjusted net earnings attributable to the company, which correspondingly impact net profit margins. A general trend of decline is observed in both reported and adjusted net profit margins from 2021 through 2023, followed by a recovery in 2024 and 2025. The adjusted net profit margin consistently tracks closely with the reported net profit margin, suggesting that adjustments are not materially altering the overall profitability picture.

Reported Net Profit Margin

The reported net profit margin decreased from 29.00% in 2021 to 22.21% in 2023, representing a substantial contraction over the two-year period. A subsequent increase is noted in 2024, reaching 18.63%, before a more significant rebound to 27.92% in 2025. This indicates a potential stabilization and recovery of profitability towards levels seen earlier in the period.

Adjusted Net Profit Margin

The adjusted net profit margin mirrors the trend of the reported margin, declining from 28.95% in 2021 to 21.27% in 2023. Similar to the reported margin, 2024 shows a modest increase to 18.32%, followed by a more pronounced recovery to 25.83% in 2025. The difference between the reported and adjusted margins remains relatively small throughout the period, consistently below one percentage point.

The decline in margins between 2021 and 2023 warrants further investigation to determine the underlying drivers, such as changes in cost of goods sold, operating expenses, or the effective tax rate. The recovery observed in 2024 and 2025 suggests that mitigating actions were taken or external factors shifted favorably. The close alignment between reported and adjusted net profit margins suggests that the adjustments being made are not fundamentally changing the core profitability of the business.

The period between 2021 and 2025 demonstrates fluctuating trends in both reported and adjusted total assets, alongside corresponding changes in total asset turnover ratios. A review of these metrics reveals insights into the company’s asset utilization efficiency.

Adjusted Total Assets

Adjusted total assets increased from US$40,395 million in 2021 to US$61,078 million in 2022, representing a substantial rise. This was followed by a further increase to US$64,490 million in 2023, before decreasing to US$60,844 million in 2024. The most recent year, 2025, shows an increase to US$67,938 million. These fluctuations suggest potential shifts in asset composition or accounting adjustments impacting the reported figures.

Reported Total Asset Turnover

Reported total asset turnover began at 0.76 in 2021, then experienced a decline to 0.51 in 2022. A slight recovery was observed in 2023, with the ratio reaching 0.54. This was followed by an increase to 0.61 in 2024, and a subsequent decrease to 0.59 in 2025. The ratio indicates the revenue generated for each dollar of assets, and the observed volatility suggests inconsistent efficiency in asset utilization.

Adjusted Total Asset Turnover

Adjusted total asset turnover mirrored the trend of the reported ratio. It started at 0.78 in 2021, decreased to 0.52 in 2022, and rose to 0.55 in 2023. The ratio increased to 0.62 in 2024 before decreasing slightly to 0.60 in 2025. The adjusted ratio, which utilizes adjusted total assets, provides a potentially more refined view of asset utilization, and its movements align with the reported ratio, indicating the changes are not solely attributable to asset adjustments.

The decline in both reported and adjusted total asset turnover from 2021 to 2022 is notable. While a partial recovery occurred in subsequent years, the ratios did not return to the 2021 levels. The increase in total assets alongside fluctuating turnover ratios suggests the company may be investing in assets that are not yet generating proportional revenue increases, or that revenue growth is not keeping pace with asset expansion. The slight decrease in both ratios in 2025 warrants further investigation to determine if this represents a continuing trend or a temporary fluctuation.

An examination of the financial information reveals trends in both reported and adjusted total assets, as well as stockholders’ deficit, over a five-year period. These figures are used to calculate financial leverage, though the leverage ratios themselves are not directly presented in the information.

Total Assets

Reported total assets increased significantly from 2021 to 2022, rising from US$41,290 million to US$61,681 million. This growth moderated in subsequent years, with a further increase to US$65,304 million in 2023, followed by a decrease to US$61,784 million in 2024, and a subsequent rise to US$69,185 million in 2025. Adjusted total assets follow a similar pattern, exhibiting the same general trend of initial strong growth, a peak in 2023, a dip in 2024, and a final increase in 2025, remaining consistently lower than reported total assets.

Stockholders’ Deficit

The reported total stockholders’ deficit remained negative throughout the period, indicating a liability position. It fluctuated between -US$8,957 million and -US$11,750 million. The adjusted total stockholders’ deficit also remained negative, showing a similar pattern of fluctuation, but with different magnitudes. The adjusted deficit was consistently more negative than the reported deficit in 2021, 2023, and 2024, while being less negative in 2022 and 2025.

Adjustments to Financial Position

The difference between reported and adjusted figures for both total assets and stockholders’ deficit suggests the presence of adjustments made to the reported values. The adjustments to total assets are relatively consistent, reducing the reported value by approximately US$900 million each year. The adjustments to the stockholders’ deficit are more variable, with larger adjustments in 2021 and 2023. These adjustments likely relate to specific accounting treatments or the exclusion of certain items from the adjusted figures, potentially providing a clearer view of the underlying financial position.

While the financial leverage ratios are not explicitly provided, the trends in adjusted total assets and adjusted stockholders’ deficit suggest potential implications for the company’s leverage position. A more negative adjusted stockholders’ deficit, coupled with changes in adjusted total assets, would influence the calculated adjusted financial leverage ratio. Further analysis would require the calculation of these ratios to fully understand the impact of these trends.

Reported net earnings attributable to PMI fluctuated over the five-year period, beginning at US$9,109 million in 2021, decreasing to US$7,057 million in 2024, and then increasing significantly to US$11,348 million in 2025. Adjusted net earnings exhibited a similar pattern, starting at US$9,091 million in 2021, declining to US$6,941 million in 2024, and rising to US$10,501 million in 2025. Total stockholders’ deficit, both reported and adjusted, was negative throughout the period, indicating a liability position. The reported deficit moved from -US$10,106 million in 2021 to -US$11,750 million in 2024 before improving to -US$9,994 million in 2025. The adjusted deficit followed a similar trend, starting at -US$10,275 million, reaching -US$10,173 million in 2024, and ending at -US$9,176 million in 2025.

Adjusted Return on Equity (ROE)

The calculation of adjusted ROE requires the inclusion of the missing values. Given the provided net earnings and stockholders’ deficit figures, adjusted ROE is calculated as Adjusted Net Earnings divided by the absolute value of Adjusted Total Stockholders’ Deficit. In 2021, adjusted ROE was approximately 88.7%. It decreased to 84.5% in 2022, then to 65.2% in 2023, and further to 68.2% in 2024. A substantial increase to 114.4% is observed in 2025. This suggests that the company’s profitability relative to its equity position improved significantly in the final year of the observed period.

The decline in adjusted ROE from 2021 to 2024 coincides with the decrease in adjusted net earnings and, to a lesser extent, the increasing magnitude of the adjusted stockholders’ deficit. The substantial increase in adjusted ROE in 2025 is primarily driven by the significant rise in adjusted net earnings, coupled with a reduction in the absolute value of the adjusted stockholders’ deficit. The consistent negative stockholders’ deficit warrants continued monitoring, as it represents a potential financial risk. The difference between reported and adjusted figures for both net earnings and stockholders’ deficit appears relatively small, suggesting that the adjustments made do not fundamentally alter the overall financial picture.

The period under review demonstrates fluctuations in both reported and adjusted net earnings, alongside significant changes in total assets. These movements consequently impact reported and adjusted return on assets (ROA). A general observation is that the adjusted ROA closely mirrors the reported ROA, suggesting that the adjustments made do not substantially alter the overall profitability picture relative to asset base.

Net Earnings Trend

Reported net earnings attributable to the company experienced a slight decrease from US$9,109 million in 2021 to US$9,048 million in 2022. A more pronounced decline followed, with earnings falling to US$7,813 million in 2023 and further to US$7,057 million in 2024. However, a substantial recovery is observed in 2025, with net earnings increasing to US$11,348 million. The adjusted net earnings follow a similar pattern, though the absolute values differ slightly.

Asset Base Evolution

Reported total assets increased considerably from US$41,290 million in 2021 to US$61,681 million in 2022, and continued to rise to US$65,304 million in 2023. A decrease is then noted in 2024, with assets falling to US$61,784 million, before increasing again to US$69,185 million in 2025. Adjusted total assets exhibit a comparable trend, indicating that the adjustments primarily relate to components within the asset base rather than a fundamental difference in overall scale.

Reported ROA Analysis

Reported ROA peaked at 22.06% in 2021, then decreased to 14.67% in 2022. This downward trend continued through 2023 (11.96%) and 2024 (11.42%). A recovery is evident in 2025, with ROA rising to 16.40%. The fluctuations in ROA largely correlate with the changes in net earnings, as the asset base experienced substantial growth during the initial period.

Adjusted ROA Analysis

Adjusted ROA mirrors the trend observed in reported ROA. It began at 22.51% in 2021, decreased to 14.43% in 2022, continued to decline to 11.60% in 2023 and 11.41% in 2024, and then increased to 15.46% in 2025. The consistency between reported and adjusted ROA suggests that the adjustments applied do not materially impact the assessment of profitability relative to the asset base. The slight differences observed are likely due to the nature of the adjustments made to net earnings and total assets.

In conclusion, the period demonstrates a cyclical pattern of profitability and asset management. The significant increase in net earnings in 2025, coupled with continued asset growth, drives the observed improvement in both reported and adjusted ROA. The close alignment between the reported and adjusted ROA values indicates that the adjustments applied do not fundamentally alter the overall financial performance assessment.