Altria Group Inc. (MO Quick QuoteMO - Free Report) posted third-quarter 2024 results, wherein the bottom line improved year over year and beat the Zacks Consensus Estimate, whereas revenues dipped due to the smokeable products segment.  However, the smokeable products segment saw robust operating income growth, driven by Marlboro's strong performance. In the oral tobacco category, MST brands sustained profitability, and on! continued its upward momentum in the market. 

Along with the earnings release, Altria has unveiled a new initiative, Optimize & Accelerate, aimed at modernizing processes to drive faster progress toward its Vision. This initiative is designed to enhance organizational speed, efficiency and effectiveness by consolidating tasks, rationalizing and regulating processes, expanding the use of generative AI and automation and outsourcing certain transactional activities. The initial phases of the initiative are projected to yield cumulative cost savings of at least $600 million over five years, which will be reinvested to support the Vision and 2028 Enterprise Goals.

MO’s Quarterly Performance: Key Insights

Adjusted earnings came in at $1.38 per share, which advanced 7.8% year over year and beat the Zacks Consensus Estimate of $1.36. Increased adjusted operating companies income (OCI) and lesser number of shares outstanding drove the bottom-line growth.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

This Zacks Rank #4 (Sell) company posted net revenues of $6,259 million, which dipped 0.4% year over year. The downside can mainly be attributed to reduced net revenues in the smokeable products unit and the all other category, somewhat made up by increased net revenues across the oral tobacco products segment. Revenues, net of excise taxes, grew 1.3% to $5,344 million. The consensus mark stood at $5,288 million.

Decoding Altria’s Segment-Wise Results

Smokeable Products: Net revenues in the category fell 0.6% year over year to $5,540 million due to reduced shipment volume and increased promotional investments. These were somewhat offset by higher pricing. Revenues, net of excise taxes, rose 1.2%.

Domestic cigarette shipment volumes tumbled 8.6% due to the industry’s decline rate and retail share losses. The industry’s decline was a result of persistent discretionary income challenges on Adult Tobacco Consumers (“ATC”) and increases in illegitimate e-vapor products. Altria’s reported cigar shipment volumes dipped 1.6%.

Adjusted OCI in the segment jumped 7.1% to $2,935 million due to improved pricing and reduced selling, general and administrative (SG&A) costs. This was somewhat negated by reduced shipment volume, increased promotional investments and escalated per unit settlement charges. The adjusted OCI margins grew 3.5 percentage points to 63.1%.

Oral Tobacco Products: Net revenues in the segment rose 5.4% to $722 million. The upside can be attributed to improved pricing and an increased percentage of on! shipment volumes in comparison to MST. Revenues, net of excise taxes, grew 5.8%.

Domestic shipment volumes grew 1.2% due to the industry’s growth rate, calendar differences and other aspects. This was partly negated by retail share losses and trade inventory movements.

Adjusted OCI increased 2% to $464 million due to increased pricing, somewhat negated by a mix change, elevated SG&A costs and reduced shipment volume. Adjusted OCI margins contracted by 1.7 percentage points to 67.2%.

Altria Stock: Other Updates

Altria ended the quarter with cash and cash equivalents of $1,897 million, long-term debt of $23,570 million and a total stockholders’ deficit of $3,468 million.

In the third quarter, Altria repurchased 13.5 million shares for $680 million. Through the first nine months, the company bought back 67.6 million shares for $3.1 billion. As of Sept. 30, 2024, the company had shares worth $310 million remaining under its existing authorized $3.4 billion share buyback program.

Altria paid dividends worth $1.7 billion in the third quarter and $5.1 billion in the first nine months of 2024, respectively. In August 2024, management hiked its quarterly dividend by 4.1%. The company retained its progressive dividend target, expecting dividend per share growth in mid-single digits annually through 2028.

What to Expect From MO in 2024?

For 2024, MO envisions adjusted earnings per share (EPS) in the range of $5.07-$5.15, which suggests 2.5-4% growth from the $4.95 recorded in 2023. Management expects the bottom-line growth to be skewed toward the second half of 2024. The guidance includes the impact of two extra shipping days in 2024. Also, the guidance considers the limited effect on combustible and e-vapor product volumes from the enforcement initiatives in the illicit e-vapor market.

As the external landscape remains dynamic, Altria continues assessing economic factors like inflation, ATC dynamics (such as purchasing patterns and the adoption of smoke-free products), illegal e-vapor enforcement and regulatory developments.

The bottom-line view also considers planned investments associated with enhanced smoke-free product research, development and marketplace activities to support MO’s smoke-free products.

For 2024, Altria expects capital expenditures of $125-$175 million.

Shares of MO have risen 1% in the past three months compared with the industry’s 5.4% growth.

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