Altria Group Beats EPS Expectations in Q3

Tobacco industry giant Altria Group (MO 8.27%) reported mixed third-quarter earnings on Thursday, October 31. Adjusted earnings per share (EPS) came in at $1.38, beating analysts’ expectations of $1.35, while revenue of $6.26 billion fell slightly short of estimates of $6.33 billion.

Altria is working to transition away from traditional cigarette products, and its portfolio of smoke-free products showed strong growth in the third quarter. Despite headwinds from regulatory and competitive pressures, management maintained its full-year earnings guidance, demonstrating resilience in a challenging environment.

Source: Altria Group of Companies. Note. Analyst consensus estimates for the quarter are courtesy of FactSet. YY = Year after year.

Overview of the Altria group of companies

Altria Group, a leader in the tobacco industry, has focused on diversifying its product offering into cigarettes in recent years. This includes switching to smoke-free alternatives with products like NJOY and more! nicotine pouches. In the third quarter of 2024, the company continued to demonstrate growth in its smoke-free product portfolio despite challenges associated with declining cigarette volumes and addressing regulatory pressures in the tobacco sector.

The company’s strategic focus on smoke-free products is consistent with its mission to convert adult smokers to less harmful alternatives. This demonstrates Altria’s commitment to offering products that meet changing consumer preferences.

Quarterly indicators

Altria’s adjusted diluted earnings per share rose 7.8% in the third quarter compared with the prior year. The growth was driven by fewer shares outstanding and higher adjusted operating income. Despite the increase in profit, net revenue decreased slightly by 0.4%.

The Marlboro brand, the cornerstone of Altria’s cigarette category, fell slightly to 41.7% from 42.3% last year. This reflects a broader industry trend of declining cigarette consumption due to rising prices, exacerbated by competitive pressures from both legal and illicit e-cigarette markets. Altria, however, is aggressively building its market share with approved alternatives, using FDA-approved products as a buffer against unregulated market players.

In terms of regulatory impact, Altria was able to obtain FDA approval for the NJOY segment, providing a significant opportunity to strengthen its position in smoke-free product categories. This approved status gives Altria a strategic opportunity to circumvent some of the regulatory hurdles that have impacted its legacy products.

Altria’s financial position remains strong, with total share repurchases of $680 million for 13.5 million shares. Altria paid $1.7 billion in dividends for the third quarter and instituted a 4.1% increase in its regular quarterly dividend, its 59th increase in 55 years. These actions highlight the company’s commitment returning value to shareholders when navigating market changes.

Looking to the future

I’m looking forward to Altria Management confirmed adjusted for the full year earnings per share forecast at $5.07 to $5.15, reflecting growth rates of 2.5% to 4%. The company continues to invest in the transition to smoke-free products and is committed to supporting this process with further innovation in its offerings. Regulatory compliance and counteracting illicit market dynamics remain key areas to ensure stability and growth.

Investors should pay close attention to how Altria is expanding its portfolio of smoke-free products, especially as it plans to expand NJOY’s market presence and continue to make strategic investments in its reduced-risk product lines. Altria’s ability to adapt to the rapidly changing tobacco landscape, along with its financial strategy, will play a critical role in maintaining its market position in the coming quarters.