MO | Q1 2025

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Overview

• Non-GAAP EPS of $1.23 beats by $0.04.

• Revenue of $4.52B (-4.2% Y/Y) misses by $100M.

Takeaways

Altria (MO) delivered a decent first quarter considering the challenging operating environment.

Most notably, on! continued to build momentum in the oral tobacco space. Shipment volumes grew 18%, and the brand expanded its share of both the oral tobacco and nicotine pouch markets—even as retail prices increased.

That strength at higher prices points to growing brand loyalty, which Altria plans to build on through continued investment behind on! and the “It’s On!” campaign.

On the e-vapor side, the picture isn’t so bright. The illicit disposable market continues to grow and now makes up more than 60% of the total e-vapor category.

As has been the case for multiple years now, Altria is pushing for stronger regulatory enforcement at both the federal and state levels, and while some progress is being made—such as new state laws and increased attorney general activity—it's pretty apparent that challenges still remain.

The NJOY brand has certainly felt the impact. Without access to flavored products and following an unfavorable ITC ruling, NJOY had to pull its ACE device from the market. Altria is appealing the decision but is also using this as an opportunity to rethink and rebuild NJOY’s product pipeline to better meet the preferences of today’s consumers (which seem to lean more toward disposables).

In the Smokeables segment, operating income by 2.7%, driven by strong pricing power even as cigarette volumes saw a big decline. Industrywide, cigarette volumes fell about 9%, with Altria’s decline slightly steeper at 12%.

Consumers, particularly at lower income levels, remain under pressure from high everyday costs, leading to more downtrading into discount cigarette brands. Marlboro did lose some share overall, but within the premium category, it actually gained share, reinforcing its leadership position.

The oral tobacco business remained highly profitable as well. While overall volumes were down, growth in on! helped offset some of the declines in moist smokeless tobacco brands like Copenhagen.

Altria’s investment in AB InBev produced lower equity earnings this quarter, down about 11%, which is mostly just a result of a smaller ownership stake compared to this time last year.

For shareholders, the company returned about $2 billion through dividends and share buybacks during the quarter and also maintained a strong balance sheet, with a debt-to-EBITDA ratio of around 2x.

For the full year, Altria reaffirmed its earnings guidance, projecting 2% to 5% growth.

This forecast assumes limited impact from enforcement actions in the e-vapor market and that NJOY ACE remains off the market through year-end. Management is also monitoring the potential impact of new tariffs, but overall, they believe they are well positioned to navigate the current environment since they’re a US company with a primarily US based supply chain.

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