MO | Q2 2024
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Overview
Non-GAAP EPS of $1.31 misses by $0.03.
Revenue of $5.28B (-3.0% Y/Y) misses by $110M.
Takeaways
In Q2 of 2024, Altria Group reported steady financial performance, keeping their adjusted diluted earnings per share (EPS) stable for the quarter, with just a slight dip of 1.6% for the first half of the year. They've fine-tuned their full-year outlook, now expecting EPS to land between $5.07 and $5.15, reflecting a growth of 2.5% to 4% compared to last year.
Altria's operational performance remained strong, with adjusted operating company income (OCI) margins improving to 61.6% for the quarter and 61% for the first half, thanks to solid pricing strategies.
The company's balance sheet is also in good shape, maintaining a debt-to-EBITDA ratio of 2.1x, aligning with its financial target of 2x. They’ve also been generous with shareholder returns, paying out $3.4 billion in dividends and having around $1 billion left for share buybacks under their current program ($2.4 billion used so far).
Altria marked a milestone this quarter with the first anniversary of NJOY joining the family. Over the past year, the company has strengthened NJOY's supply chain, expanded its reach to over 100,000 stores, and rolled out effective marketing campaigns.
A major highlight was NJOY securing the first FDA marketing granted orders for menthol e-vapor products, a big win in this tightly regulated market. NJOY's growth was handsome with 12.5 million units of consumables shipped in the second quarter alone, and 23.4 million for the first half of the year.
Device shipments also saw a substantial uptick. This growth translated into market share gains, with NJOY capturing 5.5% in consumables and 25.4% in the multi-outlet and convenience channels for devices.
With that said, it's not all smooth sailing. Altria continues to share concerns over the surge of illicit e-vapor products, which now make up more than 60% of the market.
The number of vapers has jumped by 3 million in the past year, reaching around 19 million, driven largely by these unregulated products. The problem isn't confined to e-vapor products; it extends to other tobacco categories, including nicotine pouches and cigarettes.
Altria has identified over 350 illicit nicotine pouch products, reminiscent of the early days of the illicit e-vapor market. To tackle these issues, Altria is working closely with regulators and lawmakers, and while there's been some progress, such as the formation of a federal task force to curb illegal e-vapor sales, there’s still a lot of action left to be taken.
In the oral tobacco category, Altria's on! brand has been a standout performer, with a 37% rise in shipment volume to 41 million cans in the second quarter. On! PLUS is also gaining ground internationally, particularly in Sweden and the UK.
Meanwhile, the traditional smokable products segment is feeling the pinch, with domestic cigarette volumes down 13%, partly due to economic pressures and the competition from illegal disposable e-vapor products. Despite these challenges, Marlboro continues to dominate, holding a solid 42% market share.
Overall, Altria's second-quarter results remind us that the company is navigating a tough environment, but seems to be doing so just fine. They're focused on growing their e-vapor and nicotine pouch businesses, engaging proactively with regulators, and managing a changing market environment.
The company's efforts to diversify more into its smoke-free products are key to maintaining its market leadership and setting the stage for future growth. A successful transition seems to be the only way the company can survive.