We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
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.
Behind Altria's Profit Resilience: The Power of Pricing Strategy
Read MoreHide Full Article
Key Takeaways
MO's Q1 2025 pricing strategy drove revenue gains across the Smokeable and Oral Tobacco segments.
Strong pricing power helped MO maintain margins despite cigarette volume declines and regulations.
MO expects 2025 EPS of $5.30-$5.45, reflecting up to 5% growth from 2024's adjusted base of $5.19.
Altria Group, Inc. (MO - Free Report) has demonstrated remarkable resilience in a challenging operating environment, and a major driver of this strength is its robust pricing strategy. Despite ongoing volume pressures in the cigarette category and the impact of strict regulations, the company has effectively leveraged its pricing power to support revenue and profit growth.
In the first quarter of 2025, Altria’s pricing actions played a key role in boosting revenues across both its Smokeable Products and Oral Tobacco segments. This pricing-led growth strategy continues to offset volume declines, underscoring the inelastic nature of cigarette demand. Consumers, particularly in tobacco, often remain loyal despite price hikes due to the addictive nature of the product, allowing Altria to sustain its margins.
The company’s ability to strategically raise prices without significantly losing consumers has been critical in maintaining profitability. This strength is further reflected in Altria’s 2025 earnings outlook. Management expects adjusted earnings per share (EPS) to range between $5.30 and $5.45, signaling year-over-year growth of 2% to 5% from the 2024 base of $5.19. As Altria continues to focus on premium pricing and cost discipline, it remains well-positioned to navigate industry challenges while delivering shareholder value.
How Philip Morris & Turning Point Brands Contrast With MO
Philip Morris International Inc. (PM - Free Report) continues to demonstrate that pricing power is a central engine behind its robust profitability. In the first quarter of 2025, PM reported organic net revenue growth of 10.2% and organic operating income growth of 16%, with gross margin expansion of 340 basis points (bps) on an organic basis. Notably, pricing contributed 6 points to Philip Morris’ net revenue growth, driven by an 8% increase in combustible pricing and around 3% in smoke-free products excluding devices.
Turning Point Brands, Inc. (TPB - Free Report) emphasizes brand strength and market positioning over aggressive pricing. Stoker’s portfolio of Turning Point Brands showed volume resilience due to consumer trade-down trends, while its modern oral business relies more on strategic brand building than aggressive pricing. Turning Point Brands continues to invest heavily in distribution and marketing, with margin performance influenced by mix shifts and input cost pressures, including tariffs.
MO’s Price Performance, Valuation & Estimates
Shares of Altria have gained 24.4% in the past year compared with the industry’s growth of 55.6%.
Image Source: Zacks Investment Research
From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 10.72X, below the industry’s average of 15.09X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MO’s 2025 earnings implies year-over-year growth of 4.7%, whereas its 2026 earnings estimate suggests a year-over-year uptick of 3.1%. The estimates for 2025 and 2026 have remained unchanged in the past 30 days.
Image: Bigstock
Behind Altria's Profit Resilience: The Power of Pricing Strategy
Key Takeaways
Altria Group, Inc. (MO - Free Report) has demonstrated remarkable resilience in a challenging operating environment, and a major driver of this strength is its robust pricing strategy. Despite ongoing volume pressures in the cigarette category and the impact of strict regulations, the company has effectively leveraged its pricing power to support revenue and profit growth.
In the first quarter of 2025, Altria’s pricing actions played a key role in boosting revenues across both its Smokeable Products and Oral Tobacco segments. This pricing-led growth strategy continues to offset volume declines, underscoring the inelastic nature of cigarette demand. Consumers, particularly in tobacco, often remain loyal despite price hikes due to the addictive nature of the product, allowing Altria to sustain its margins.
The company’s ability to strategically raise prices without significantly losing consumers has been critical in maintaining profitability. This strength is further reflected in Altria’s 2025 earnings outlook. Management expects adjusted earnings per share (EPS) to range between $5.30 and $5.45, signaling year-over-year growth of 2% to 5% from the 2024 base of $5.19. As Altria continues to focus on premium pricing and cost discipline, it remains well-positioned to navigate industry challenges while delivering shareholder value.
How Philip Morris & Turning Point Brands Contrast With MO
Philip Morris International Inc. (PM - Free Report) continues to demonstrate that pricing power is a central engine behind its robust profitability. In the first quarter of 2025, PM reported organic net revenue growth of 10.2% and organic operating income growth of 16%, with gross margin expansion of 340 basis points (bps) on an organic basis. Notably, pricing contributed 6 points to Philip Morris’ net revenue growth, driven by an 8% increase in combustible pricing and around 3% in smoke-free products excluding devices.
Turning Point Brands, Inc. (TPB - Free Report) emphasizes brand strength and market positioning over aggressive pricing. Stoker’s portfolio of Turning Point Brands showed volume resilience due to consumer trade-down trends, while its modern oral business relies more on strategic brand building than aggressive pricing. Turning Point Brands continues to invest heavily in distribution and marketing, with margin performance influenced by mix shifts and input cost pressures, including tariffs.
MO’s Price Performance, Valuation & Estimates
Shares of Altria have gained 24.4% in the past year compared with the industry’s growth of 55.6%.
Image Source: Zacks Investment Research
From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 10.72X, below the industry’s average of 15.09X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MO’s 2025 earnings implies year-over-year growth of 4.7%, whereas its 2026 earnings estimate suggests a year-over-year uptick of 3.1%. The estimates for 2025 and 2026 have remained unchanged in the past 30 days.
Image Source: Zacks Investment Research
MO stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.