We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Altria (MO) Gains on Pricing Power Amid Low Cigarette Volumes
Read MoreHide Full Article
Altria Group, Inc. (MO - Free Report) looks well-positioned due to the strength of its Oral Tobacco Products segment. Solid pricing power has also been working well for the company amid low cigarette volumes. These upsides were witnessed in the first quarter of 2023.
After considering the buyout of NJOY Holdings, Inc. (concluded on Jun 1, 2023), Altria envisions the full-year 2023 adjusted EPS in the band of $4.89-$5.03, calling for 1-4% growth from the year-ago period’s adjusted EPS of $4.84.
Key Upsides
Altria has been responding to the changing market scenario by offering several oral tobacco, e-vapor and heated tobacco products. The company (through its subsidiary Helix Innovations) has full global ownership of on! — a popular tobacco-derived nicotine (TDN) pouch product. on! is a worthwhile addition to Altria’s smokeless portfolio as oral TDN products are gaining popularity in the United States due to their low-risk claims.
Management continues to expand the manufacturing capacity and the commercial availability of the product. Net revenues in the Oral Tobacco Products segment rose 2.4% from the year-ago quarter’s level to $628 million in the first quarter of 2023. The upside can be attributed to improved pricing. In the first quarter, on! reported shipment volumes grew 38% to 25.2 million cans. on! saw its share of the total oral tobacco category increase by 2.4 share points to 6.5% in the first quarter.
Altria is committed to responsibly speeding up the U.S. adoption of NJOY ACE, which is presently the only pod-based e-vapor product with FDA’s marketing approval. The company’s strategic deal with JT Group, which includes a joint venture for the U.S. commercialization of heated tobacco stick products, is noteworthy. Moreover, MO is undertaking efforts to expand in the cannabis industry. This is evident from the acquisition of the stakes of the Canadian cannabis company, Cronos Group.
Moving on, Altria has been benefiting from its strong pricing power. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases due to the addictive quality of cigarettes. In the first quarter of 2023, higher pricing offered respite to revenues across the Smokeable Products and Oral Tobacco categories, which were otherwise hurt by lower volumes. Higher pricing aided the adjusted operating companies income (OCI) in both segments.
Image Source: Zacks Investment Research
Volume Concerns
In the first quarter of 2023, Altria’s net revenues fell 2.9% year over year to $5,719 million. The decline was mainly due to reduced net revenues in the Smokeable Products unit.
In the Smokeable Products segment, net revenues dropped 3.3% year over year to $5,090 million due to the reduced shipment volume and increased promotional investments, partly compensated by greater pricing. Domestic cigarette shipment volumes decreased 11.4%, mainly due to the industry’s decline rate, retail share losses and trade inventory movements, partly countered by calendar differences.
The industry’s decline and retail share losses were a result of macroeconomic pressure on Adult Tobacco Consumers’ (ATCs) disposable income. On its first-quarter earnings call, management stated that consumers’ discretionary income remained pressurized due to a rise in overall inflation.
Increased inflation has been causing consumers to alter their buying patterns, which has been weighing on cigarette industry volumes since the second quarter of 2022. These factors lingered in the first quarter of 2023, and the company plans to continue assessing these aspects and their impacts on tobacco consumers throughout this year.
Apart from this, management’s bottom-line view for 2023 considers planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free product research, development and marketplace activities to support the company’s smoke-free products. The view also considers the reduced expected net periodic benefit income.
Nonetheless, robust pricing actions and Oral Tobacco Products’ strength are likely to keep working well for Altria amid the abovementioned headwinds.
Shares of the Zacks Rank #3 (Hold) company have climbed 0.1% year to date against the industry’s drop of 10.3%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Conagra Brands (CAG - Free Report) .
The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Altria (MO) Gains on Pricing Power Amid Low Cigarette Volumes
Altria Group, Inc. (MO - Free Report) looks well-positioned due to the strength of its Oral Tobacco Products segment. Solid pricing power has also been working well for the company amid low cigarette volumes. These upsides were witnessed in the first quarter of 2023.
After considering the buyout of NJOY Holdings, Inc. (concluded on Jun 1, 2023), Altria envisions the full-year 2023 adjusted EPS in the band of $4.89-$5.03, calling for 1-4% growth from the year-ago period’s adjusted EPS of $4.84.
Key Upsides
Altria has been responding to the changing market scenario by offering several oral tobacco, e-vapor and heated tobacco products. The company (through its subsidiary Helix Innovations) has full global ownership of on! — a popular tobacco-derived nicotine (TDN) pouch product. on! is a worthwhile addition to Altria’s smokeless portfolio as oral TDN products are gaining popularity in the United States due to their low-risk claims.
Management continues to expand the manufacturing capacity and the commercial availability of the product. Net revenues in the Oral Tobacco Products segment rose 2.4% from the year-ago quarter’s level to $628 million in the first quarter of 2023. The upside can be attributed to improved pricing. In the first quarter, on! reported shipment volumes grew 38% to 25.2 million cans. on! saw its share of the total oral tobacco category increase by 2.4 share points to 6.5% in the first quarter.
Altria is committed to responsibly speeding up the U.S. adoption of NJOY ACE, which is presently the only pod-based e-vapor product with FDA’s marketing approval. The company’s strategic deal with JT Group, which includes a joint venture for the U.S. commercialization of heated tobacco stick products, is noteworthy. Moreover, MO is undertaking efforts to expand in the cannabis industry. This is evident from the acquisition of the stakes of the Canadian cannabis company, Cronos Group.
Moving on, Altria has been benefiting from its strong pricing power. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases due to the addictive quality of cigarettes. In the first quarter of 2023, higher pricing offered respite to revenues across the Smokeable Products and Oral Tobacco categories, which were otherwise hurt by lower volumes. Higher pricing aided the adjusted operating companies income (OCI) in both segments.
Image Source: Zacks Investment Research
Volume Concerns
In the first quarter of 2023, Altria’s net revenues fell 2.9% year over year to $5,719 million. The decline was mainly due to reduced net revenues in the Smokeable Products unit.
In the Smokeable Products segment, net revenues dropped 3.3% year over year to $5,090 million due to the reduced shipment volume and increased promotional investments, partly compensated by greater pricing. Domestic cigarette shipment volumes decreased 11.4%, mainly due to the industry’s decline rate, retail share losses and trade inventory movements, partly countered by calendar differences.
The industry’s decline and retail share losses were a result of macroeconomic pressure on Adult Tobacco Consumers’ (ATCs) disposable income. On its first-quarter earnings call, management stated that consumers’ discretionary income remained pressurized due to a rise in overall inflation.
Increased inflation has been causing consumers to alter their buying patterns, which has been weighing on cigarette industry volumes since the second quarter of 2022. These factors lingered in the first quarter of 2023, and the company plans to continue assessing these aspects and their impacts on tobacco consumers throughout this year.
Apart from this, management’s bottom-line view for 2023 considers planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free product research, development and marketplace activities to support the company’s smoke-free products. The view also considers the reduced expected net periodic benefit income.
Nonetheless, robust pricing actions and Oral Tobacco Products’ strength are likely to keep working well for Altria amid the abovementioned headwinds.
Shares of the Zacks Rank #3 (Hold) company have climbed 0.1% year to date against the industry’s drop of 10.3%.
Solid Staple Stocks
Some better-ranked consumer staple stocks are The Kraft Heinz Company (KHC - Free Report) , McCormick & Company, Incorporated (MKC - Free Report) and Conagra Brands (CAG - Free Report) .
The Kraft Heinz Company, a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 10.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for The Kraft Heinz Company’s current fiscal-year sales and earnings suggests growth of 2.8% and 3.6%, respectively, from the year-ago reported figures.
McCormick, which operates as a manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors, currently carries a Zacks Rank #2. MKC has a trailing four-quarter negative earnings surprise of 3.7%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings suggests growth of 6.4% and 3.6%, respectively, from the year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests growth of 7.1% and 16.5%, respectively, from the year-ago reported numbers.