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Altria (MO) Troubled by High Costs, Soft Smokeable Volumes
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Altria Group, Inc. (MO - Free Report) appears troubled by cost woes and soft volumes in the Smokeable Products segment. The impact of these downsides was witnessed in the third quarter of 2022, wherein net revenues fell 3.5% year over year to $6,550 million due to reduced revenues from the smokeable products segment, as well as the lack of revenues from the wine segment, which was divested in October 2021.
Let’s delve deeper into the aspects that have been acting as hurdles for this Zacks Rank #4 (Sell) company.
What’s Not Working Well?
In the third quarter of 2022, Altria’s Smokeable Products net revenues dipped 1.6% year over year to $5,882 million due to the reduced shipment volume and increased promotional investments. Domestic cigarette shipment volumes were down 9.2% year over year, mainly driven by the industry’s rate of decline and retail share losses, somewhat compensated by trade inventory movements. On adjusting for trade inventory movements and other factors, smokeable products’ domestic cigarette shipment volumes fell an estimated 8%.
Within the smoke-free category, total estimated e-vapor volumes dropped 4% in the third quarter of 2022 due to regulatory uncertainty associated with JUUL. On its third-quarter earnings call, management stated that only a small fraction of e-vapor volumes had been authorized and no oral nicotine health products had been given market authorization.
Image Source: Zacks Investment Research
Cost inflation and increased gas prices were a headwind in the third quarter. Wage costs also increased. The persistence of these factors remains a concern. Management’s bottom-line view for 2022 considers planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free product research, development and regulatory preparation expenses and marketplace activities to support the company’s smoke-free products. The view also includes anticipation of the inflation of Master Settlement Agreement expenses and direct and indirect material costs.
The company continues assessing external environmental factors like increased inflation, higher interest rates, global supply-chain hurdles and ATC dynamics, such as purchasing patterns, the adoption of smoke-free products and disposable income. Apart from this, cigarette shipment volumes have generally been affected by anti-tobacco campaigns and increased consumer awareness regarding the harmful impacts of tobacco consumption. Regulatory hurdles are also a vital factor limiting the marketing of cigarettes, thereby affecting sales volume.
Wrapping Up
While strong pricing power and focus on expanding Oral Tobacco Products bodes well, we cannot ignore the abovementioned headwinds, at least in the near term. Shares of Altria have climbed 1.9% in the past three months, underperforming the industry’s growth of 9.4%.
Inter Parfums, a manufacturer, marketer and distributor of a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 27.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ 2023 sales and earnings suggests growth of 5.8% and 5.3%, respectively, from the corresponding year-ago reported figures.
Philip Morris, which is a tobacco products behemoth, currently carries a Zacks Rank of 2 (Buy). PM has a trailing four-quarter earnings surprise of 9.9%, on average.
Philip Morris has an expected EPS growth rate of 5% for three to five years.
e.l.f. Beauty, which provides cosmetic and skin care products, currently sports a Zacks Rank #1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and EPS suggests an increase of 24.8% and 33.3%, respectively from the year-ago reported number.
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Altria (MO) Troubled by High Costs, Soft Smokeable Volumes
Altria Group, Inc. (MO - Free Report) appears troubled by cost woes and soft volumes in the Smokeable Products segment. The impact of these downsides was witnessed in the third quarter of 2022, wherein net revenues fell 3.5% year over year to $6,550 million due to reduced revenues from the smokeable products segment, as well as the lack of revenues from the wine segment, which was divested in October 2021.
Let’s delve deeper into the aspects that have been acting as hurdles for this Zacks Rank #4 (Sell) company.
What’s Not Working Well?
In the third quarter of 2022, Altria’s Smokeable Products net revenues dipped 1.6% year over year to $5,882 million due to the reduced shipment volume and increased promotional investments. Domestic cigarette shipment volumes were down 9.2% year over year, mainly driven by the industry’s rate of decline and retail share losses, somewhat compensated by trade inventory movements. On adjusting for trade inventory movements and other factors, smokeable products’ domestic cigarette shipment volumes fell an estimated 8%.
Within the smoke-free category, total estimated e-vapor volumes dropped 4% in the third quarter of 2022 due to regulatory uncertainty associated with JUUL. On its third-quarter earnings call, management stated that only a small fraction of e-vapor volumes had been authorized and no oral nicotine health products had been given market authorization.
Image Source: Zacks Investment Research
Cost inflation and increased gas prices were a headwind in the third quarter. Wage costs also increased. The persistence of these factors remains a concern. Management’s bottom-line view for 2022 considers planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free product research, development and regulatory preparation expenses and marketplace activities to support the company’s smoke-free products. The view also includes anticipation of the inflation of Master Settlement Agreement expenses and direct and indirect material costs.
The company continues assessing external environmental factors like increased inflation, higher interest rates, global supply-chain hurdles and ATC dynamics, such as purchasing patterns, the adoption of smoke-free products and disposable income. Apart from this, cigarette shipment volumes have generally been affected by anti-tobacco campaigns and increased consumer awareness regarding the harmful impacts of tobacco consumption. Regulatory hurdles are also a vital factor limiting the marketing of cigarettes, thereby affecting sales volume.
Wrapping Up
While strong pricing power and focus on expanding Oral Tobacco Products bodes well, we cannot ignore the abovementioned headwinds, at least in the near term. Shares of Altria have climbed 1.9% in the past three months, underperforming the industry’s growth of 9.4%.
Better Consumer Staple Stocks to Grab
Some better-ranked stocks are Inter Parfums (IPAR - Free Report) , Philip Morris (PM - Free Report) and e.l.f. Beauty, Inc. (ELF - Free Report) .
Inter Parfums, a manufacturer, marketer and distributor of a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 27.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ 2023 sales and earnings suggests growth of 5.8% and 5.3%, respectively, from the corresponding year-ago reported figures.
Philip Morris, which is a tobacco products behemoth, currently carries a Zacks Rank of 2 (Buy). PM has a trailing four-quarter earnings surprise of 9.9%, on average.
Philip Morris has an expected EPS growth rate of 5% for three to five years.
e.l.f. Beauty, which provides cosmetic and skin care products, currently sports a Zacks Rank #1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and EPS suggests an increase of 24.8% and 33.3%, respectively from the year-ago reported number.