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's (MO) Pricing Power Aids Amid Soft Cigarette Volumes
Read MoreHide Full Article
Altria Group, Inc. (MO - Free Report) has been solidifying its position in the tobacco space with its pricing power and focus on smoke-free products as a response to consumers’ changing preferences. These upsides have been working well for this Zacks Rank #3 (Hold) company amid soft cigarette volumes.
Higher Pricing Helps MO
Strong pricing power has been helping Altria stay firm amid soft cigarette shipment volumes and times of higher taxes. 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 third quarter of 2023, higher pricing offered aided revenues across the Smokeable Products and Oral Tobacco categories, which were otherwise hurt by lower volumes.
Solid Smoke-Free Products
Consumers are increasingly gravitating toward reduced-risk products (RRPs) or smoke-free alternatives, driven by the well-familiar health risks associated with traditional cigarette smoking. In response to this evolving market dynamic, Altria has adapted its strategy by introducing various oral tobacco, e-vapor and heated tobacco offerings.
The company, through its subsidiary Helix Innovations, holds full global ownership of on!, a widely embraced tobacco-derived nicotine (TDN) pouch product. Management sees on! as a valuable addition to MO’s smoke-free product portfolio, particularly given the growing popularity of oral TDN products in the United States, where they are marketed as low-risk options.
Altria is actively increasing both manufacturing capacity and the commercial availability of on! to meet the rising demand. The significant strategic agreement between Altria and JT Group (announced in October 2022) for the commercialization of heated tobacco stick products in the United States also deserves attention.
Net revenues in the Oral Tobacco Products segment saw a 2.2% increase to $685 million in the third quarter of 2023, driven by enhanced pricing strategies and a reduction in promotional investments. During the quarter, on! continued to expand its retail market share within the oral tobacco category on a year-over-year basis.
Image Source: Zacks Investment Research
Soft Smokeable Product Volumes
The overall cigarette industry has been bearing the brunt of the inflationary environment, which has affected Adult Tobacco Consumers’ (“ATC”) spending patterns. Altria has been witnessing a decline in its Smokeable Product segment revenues for the past few quarters now, which has been hurting the company’s overall top line.
Net revenues in MO’s Smokeable Products segment decreased 5.3% year over year to $5,572 million in the third quarter due to the reduced shipment volume. Domestic cigarette shipment volumes tumbled 11.6%, mainly due to the industry’s decline rate and retail share losses, trade inventory movements and calendar differences. The industry’s decline was a result of macroeconomic pressure on ATC disposable income and increases in illegitimate e-vapor products.
Management narrowed its guidance range for 2023 in its third-quarter earnings release. It now envisions the adjusted EPS in the range of $4.91-$4.98, indicating growth of 1.5-3% from the $4.84 recorded in 2022.
Earlier, management projected adjusted EPS in the band of $4.89-$5.03, suggesting growth of 1-4%. The bottom-line view for 2023 considers planned investments associated with costs to improve the digital consumer engagement system and enhanced smoke-free product research, development and marketplace activities to support the company’s smoke-free products (including investments related to the commercialization of ACE in the United States).
Wrapping Up
While the aforementioned investments are likely to affect the bottom line, these bode well for Altria’s long-term growth. Incidentally, the company highlighted its 2028 Enterprise Goals at its 2023 Investor Day. MO targets generating mid-single-digit adjusted EPS growth through 2028 (on a compounded annual basis). Moreover, U.S. smoke-free volumes are expected to grow by at least 35% from the 2022 level of 800 million units.
Shares of Altria have dropped 0.8% year to date compared with the industry’s decline of 3.8%.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Celsius Holdings, Inc. (CELH - Free Report) , which develops, processes, markets, distributes and sells functional drinks and liquid supplements, holds a Zacks Rank #2. CELH has a trailing four-quarter earnings surprise of 110.9%, on average.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 98.5% and 184.1%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Altria's (MO) Pricing Power Aids Amid Soft Cigarette Volumes
Altria Group, Inc. (MO - Free Report) has been solidifying its position in the tobacco space with its pricing power and focus on smoke-free products as a response to consumers’ changing preferences. These upsides have been working well for this Zacks Rank #3 (Hold) company amid soft cigarette volumes.
Higher Pricing Helps MO
Strong pricing power has been helping Altria stay firm amid soft cigarette shipment volumes and times of higher taxes. 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 third quarter of 2023, higher pricing offered aided revenues across the Smokeable Products and Oral Tobacco categories, which were otherwise hurt by lower volumes.
Solid Smoke-Free Products
Consumers are increasingly gravitating toward reduced-risk products (RRPs) or smoke-free alternatives, driven by the well-familiar health risks associated with traditional cigarette smoking. In response to this evolving market dynamic, Altria has adapted its strategy by introducing various oral tobacco, e-vapor and heated tobacco offerings.
The company, through its subsidiary Helix Innovations, holds full global ownership of on!, a widely embraced tobacco-derived nicotine (TDN) pouch product. Management sees on! as a valuable addition to MO’s smoke-free product portfolio, particularly given the growing popularity of oral TDN products in the United States, where they are marketed as low-risk options.
Altria is actively increasing both manufacturing capacity and the commercial availability of on! to meet the rising demand. The significant strategic agreement between Altria and JT Group (announced in October 2022) for the commercialization of heated tobacco stick products in the United States also deserves attention.
Net revenues in the Oral Tobacco Products segment saw a 2.2% increase to $685 million in the third quarter of 2023, driven by enhanced pricing strategies and a reduction in promotional investments. During the quarter, on! continued to expand its retail market share within the oral tobacco category on a year-over-year basis.
Image Source: Zacks Investment Research
Soft Smokeable Product Volumes
The overall cigarette industry has been bearing the brunt of the inflationary environment, which has affected Adult Tobacco Consumers’ (“ATC”) spending patterns. Altria has been witnessing a decline in its Smokeable Product segment revenues for the past few quarters now, which has been hurting the company’s overall top line.
Net revenues in MO’s Smokeable Products segment decreased 5.3% year over year to $5,572 million in the third quarter due to the reduced shipment volume. Domestic cigarette shipment volumes tumbled 11.6%, mainly due to the industry’s decline rate and retail share losses, trade inventory movements and calendar differences. The industry’s decline was a result of macroeconomic pressure on ATC disposable income and increases in illegitimate e-vapor products.
Management narrowed its guidance range for 2023 in its third-quarter earnings release. It now envisions the adjusted EPS in the range of $4.91-$4.98, indicating growth of 1.5-3% from the $4.84 recorded in 2022.
Earlier, management projected adjusted EPS in the band of $4.89-$5.03, suggesting growth of 1-4%. The bottom-line view for 2023 considers planned investments associated with costs to improve the digital consumer engagement system and enhanced smoke-free product research, development and marketplace activities to support the company’s smoke-free products (including investments related to the commercialization of ACE in the United States).
Wrapping Up
While the aforementioned investments are likely to affect the bottom line, these bode well for Altria’s long-term growth. Incidentally, the company highlighted its 2028 Enterprise Goals at its 2023 Investor Day. MO targets generating mid-single-digit adjusted EPS growth through 2028 (on a compounded annual basis). Moreover, U.S. smoke-free volumes are expected to grow by at least 35% from the 2022 level of 800 million units.
Shares of Altria have dropped 0.8% year to date compared with the industry’s decline of 3.8%.
3 Staple Picks
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 9.9%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Celsius Holdings, Inc. (CELH - Free Report) , which develops, processes, markets, distributes and sells functional drinks and liquid supplements, holds a Zacks Rank #2. CELH has a trailing four-quarter earnings surprise of 110.9%, on average.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 98.5% and 184.1%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.