Tobacco industry giant Altria Group (MO -0.23%) reported mixed third-quarter earnings on Thursday, Oct. 31. Adjusted earnings per share (EPS) were $1.38, exceeding analyst expectations of $1.35, while revenue of $6.26 billion fell slightly short of the $6.33 billion estimate.
Altria has been working to shift away from traditional cigarette products and its smoke-free portfolio showed robust growth in Q3. Despite headwinds from regulatory and competition pressures, management reaffirmed its full-year earnings guidance, demonstrating resilience in a challenged environment.
| Metric | Q3 2024 | Analyst Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $6.26 billion | $6.33 billion | $6.28 billion | (0.4%) |
| Adjusted EPS | $1.38 | $1.35 | $1.28 | 7.8% |
| Revenue net of excise taxes | $5.34 billion | - | $5.28 billion | 1.3% |
| Marlboro retail share | 41.7% | - | 42.3% | (60 bps) |
Source: Altria Group. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.
Overview of Altria Group
Altria Group, a leader the tobacco industry, has focused on diversifying its product offerings away from cigarettes in recent years. This includes a shift towards smoke-free alternatives with products like NJOY and on! nicotine pouches. In Q3 2024, the company continued to see growth in its smoke-free portfolio, despite the challenges of declining cigarette volumes and navigating regulatory pressures in the tobacco sector.
The company's strategic emphasis on smoke-free products is aligned with its mission to transition adult smokers to less harmful alternatives. This shows Altria's commitment to offering products that cater to evolving consumer preferences.
Quarterly Highlights
Altria's adjusted diluted EPS increased by 7.8% in Q3 compared to the previous year. The rise was attributed to fewer shares outstanding and higher adjusted operating income. Despite this earnings growth, net revenue marginally declined by 0.4%.
The Marlboro brand, a cornerstone of Altria's cigarette category, saw a slight retail share decrease to 41.7% from 42.3% last year. This reflects broader industry trends of declining cigarette consumption due to rising prices, exacerbated by competitive pressures from both legitimate and illicit e-vapor markets. Altria, however, has been proactive in reinforcing its market share through approved alternatives, holding FDA-approved products as a buffer against unregulated market players.
In terms of regulatory impact, Altria managed to secure FDA approvals for the NJOY segment, presenting a significant opportunity to strengthen its foothold in smoke-free categories. This approved status positions Altria strategically to potentially circumvent some of the regulatory difficulties that have affected its traditional products.
Altria's financial position remains robust, with share repurchases totaling $680 million for 13.5 million shares. Altria paid $1.7 billion in dividends for Q3, and instituted a 4.1% increase in the regular quarterly dividend, marking the 59th increase in 55 years. These actions underscore the company's commitment to returning value to shareholders while navigating market changes.
Looking Ahead
Looking forward, Altria's management reaffirmed its full-year adjusted EPS guidance of $5.07 to $5.15, reflecting a growth rate of 2.5% to 4%. The company continues to invest in its transition to smoke-free products and aims to bolster these with further innovation in its offerings. Maintaining regulatory compliance and countering illicit market dynamics remain key focus areas to ensure stability and growth.
Investors should pay close attention to how Altria expands its smoke-free portfolio, especially with plans to grow NJOY’s market presence and continue strategic investments in its reduced-risk product lines. Altria's ability to adapt to the rapidly changing tobacco landscape, alongside its financial strategies, will play a crucial role in sustaining its market position in upcoming quarters.
