Altria ((MO)) has held its Q1 earnings call. Read on for the main highlights of the call.
Altria’s recent earnings call revealed a mixed sentiment, highlighting both positive growth and notable challenges. The company demonstrated robust growth in the oral nicotine pouch category and maintained strong performance in smokeable products. However, concerns were raised due to challenges in the e-vapor market and a decline in cigarette volumes, compounded by economic pressures on consumers.
Growth in Oral Nicotine Pouches
The oral nicotine pouch category experienced a notable surge, with industry volume increasing by an estimated 10% over the past six months. Altria’s product, ON!, saw an impressive 18% growth in reported shipment volume in the first quarter, expanding its share of the oral tobacco category to 8.8%.
Strong Performance of Smokeable Products
Altria’s smokeable products segment showed resilience, with adjusted operating company’s income growing by 2.7%. This growth was supported by a robust net price realization of 10.8%, showcasing the segment’s strength despite market challenges.
Shareholder Returns
Altria demonstrated its commitment to shareholder returns by paying approximately $1.7 billion in dividends and repurchasing 5.7 million shares for $326 million in the first quarter, reflecting a strong focus on returning value to shareholders.
Marlboro’s Resilient Performance
Marlboro maintained its leadership in the premium segment, expanding its share by 0.1 share point to 59.3%. This performance highlights Marlboro’s resilience in the face of economic pressures.
Decline in Cigarette Volume
The smokable products segment faced challenges, with domestic cigarette volumes declining by 13.7% in the first quarter. After adjustments, the decline stood at 12%, indicating a significant drop in cigarette consumption.
Challenges in E-vapor Market
The e-vapor market presented significant hurdles for Altria, particularly with NJOY facing ITC’s exclusion and cease and desist orders, resulting in a noncash impairment charge of $873 million. Over 60% of the e-vapor market now comprises illicit products, posing a substantial challenge.
Economic Pressures on Consumers
Inflation continues to outpace overall wage growth, affecting consumer purchasing behavior. This economic pressure is evident as the discount cigarette segment grew by 1.8 share points, indicating a shift in consumer preferences.
Forward-Looking Guidance
Altria’s management provided guidance for fiscal year 2025, projecting a full-year adjusted diluted EPS range of $5.30 to $5.45, reflecting a growth rate of 2% to 5% from a base of $5.19 in 2024. The company emphasized its focus on maintaining strong cash returns through dividends and share repurchases, with $674 million remaining under the current share repurchase program. Despite challenges, Altria remains committed to regulatory engagements and product innovation to navigate the evolving market landscape.
In summary, Altria’s earnings call highlighted a balanced mix of growth opportunities and market challenges. While the company showed strength in oral nicotine pouches and smokeable products, it faces significant hurdles in the e-vapor market and declining cigarette volumes. Economic pressures on consumers further complicate the landscape, but Altria’s forward-looking guidance suggests a strategic focus on maintaining strong financial performance.