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Altria (MO) Gains on Strong Pricing & Oral Tobacco Products
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Altria Group, Inc. (MO - Free Report) appears well-positioned, with the company gaining on its strong pricing power. Moreover, a focus on oral tobacco products has been driving growth for the company. Altria has been gaining from the growth in on! oral nicotine pouches. For 2022, Altria envisions 4% to 7% growth in the bottom line, which is likely to be more weighted toward the second half.
However, the 2022 view takes into account planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free products research and development and regulatory preparation expenses and marketplace activities to support the company’s smoke-free products. The view also anticipates the inflation of Master Settlement Agreement expenses and direct material costs.
Let’s take a closer look.
Altria Group, Inc. Price, Consensus and EPS Surprise
Altria’s strong pricing helped it stay afloat, even amid soft cigarette shipment volumes and 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 fourth quarter of 2021, higher pricing supported revenues across the Smokeable Products and Oral Tobacco categories. Moreover, higher pricing aided adjusted operating companies income in the Smokeable Products segment. The continuation of such trends is likely to remain an upside for MO.
There has been a general shift among consumers toward several reduced risk tobacco products due to the serious health hazards of smoking cigarettes. Altria has been responding to the changing market scenario by offering several oral tobacco and heated tobacco products. Altria (through its subsidiary, Helix Innovations) has full global ownership of on! – a popular tobacco-derived nicotine (TDN) pouch product. Management believes that 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. In the fourth quarter, the total U.S. oral tobacco category share for on! nicotine pouches increased to 3.9%, up 0.9 percentage points sequentially. As of Dec 31, 2021, Helix expanded its U.S distribution of on! to 117,000 retail stores. The company submitted pre-market tobacco product applications for the entire on! portfolio to the FDA, which currently remains pending. Helix is working on modified risk tobacco product applications for on!
Apart from this, 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. The company remains committed to the heated tobacco category and believes that it can play an important role in transitioning smokers to a smoke-free future. Net revenues in the oral tobacco products segment jumped 4.9% from the year-ago quarter’s level to $663 million in the fourth quarter due to greater pricing. In 2022, management plans to make investments related to digital consumer engagement, regulatory preparations and marketplace activities to support its smoke-free products and smoke-free products research and development.
Image Source: Zacks Investment Research
Hurdles on Way
Altria continues to assess the macroeconomic impacts of the pandemic on adult tobacco consumers, such as stay-at-home trends, disposable income, buying patterns, the adoption of smoke-free products and tobacco usage occasions, among others. The company also continues to assess the impacts of any supply-chain or distribution-related disruption. Cigarette shipment volumes, in general, are being affected by anti-tobacco campaigns and increased consumer awareness regarding the harmful impacts of tobacco consumption. Regulatory hurdles (discussed below) are also a vital factor limiting the marketing of cigarettes, thereby adversely impacting its sales volume.
Apart from this, on Nov 29, 2021, the importation ban and cease-and-desist orders forced by the International Trade Commission on the IQOS device, Marlboro HeatSticks and infringing components went into effect. The IQOS system is not available for sale any longer in the United States. On its fourth-quarter earnings call, Altria stated that it does not expect PM USA to have access to IQOS devices or Marlboro HeatSticks in 2022.
However, we believe that the abovementioned upsides are likely to continue backing growth for this Zacks Rank #3 (Hold) company, which has rallied 16.5% in the past six months compared with the industry’s upside of 10.2%.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen, and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). Shares of Pilgrim’s Pride have moved down 14.5% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial-year earnings per share (EPS) suggests growth of 19.7% from the year-ago reported number. PPC has a trailing four-quarter earnings surprise of 24.9%, on average.
Tyson Foods, a renowned meat products company, carries a Zacks Rank #2 (Buy) at present. Shares of Tyson Foods have jumped 16% in the past six months.
The Zacks Consensus Estimate for Tyson Foods’ current financial-year sales and EPS suggests growth of 9.5% and 5.6%, respectively, from the year-ago reported number. TSN has a trailing four-quarter earnings surprise of 32.2%, on average.
Flowers Foods, the producer and marketer of packaged bakery products, currently carries a Zacks Rank #2. Shares of Flowers Foods have risen 8.2% in the past six months.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and EPS suggests growth of 7.2% and roughly 4%, respectively, from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of around 6%, on average.
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Altria (MO) Gains on Strong Pricing & Oral Tobacco Products
Altria Group, Inc. (MO - Free Report) appears well-positioned, with the company gaining on its strong pricing power. Moreover, a focus on oral tobacco products has been driving growth for the company. Altria has been gaining from the growth in on! oral nicotine pouches. For 2022, Altria envisions 4% to 7% growth in the bottom line, which is likely to be more weighted toward the second half.
However, the 2022 view takes into account planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free products research and development and regulatory preparation expenses and marketplace activities to support the company’s smoke-free products. The view also anticipates the inflation of Master Settlement Agreement expenses and direct material costs.
Let’s take a closer look.
Altria Group, Inc. Price, Consensus and EPS Surprise
Altria Group, Inc. price-consensus-eps-surprise-chart | Altria Group, Inc. Quote
Factors Backing Altria
Altria’s strong pricing helped it stay afloat, even amid soft cigarette shipment volumes and 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 fourth quarter of 2021, higher pricing supported revenues across the Smokeable Products and Oral Tobacco categories. Moreover, higher pricing aided adjusted operating companies income in the Smokeable Products segment. The continuation of such trends is likely to remain an upside for MO.
There has been a general shift among consumers toward several reduced risk tobacco products due to the serious health hazards of smoking cigarettes. Altria has been responding to the changing market scenario by offering several oral tobacco and heated tobacco products. Altria (through its subsidiary, Helix Innovations) has full global ownership of on! – a popular tobacco-derived nicotine (TDN) pouch product. Management believes that 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. In the fourth quarter, the total U.S. oral tobacco category share for on! nicotine pouches increased to 3.9%, up 0.9 percentage points sequentially. As of Dec 31, 2021, Helix expanded its U.S distribution of on! to 117,000 retail stores. The company submitted pre-market tobacco product applications for the entire on! portfolio to the FDA, which currently remains pending. Helix is working on modified risk tobacco product applications for on!
Apart from this, 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. The company remains committed to the heated tobacco category and believes that it can play an important role in transitioning smokers to a smoke-free future. Net revenues in the oral tobacco products segment jumped 4.9% from the year-ago quarter’s level to $663 million in the fourth quarter due to greater pricing. In 2022, management plans to make investments related to digital consumer engagement, regulatory preparations and marketplace activities to support its smoke-free products and smoke-free products research and development.
Image Source: Zacks Investment Research
Hurdles on Way
Altria continues to assess the macroeconomic impacts of the pandemic on adult tobacco consumers, such as stay-at-home trends, disposable income, buying patterns, the adoption of smoke-free products and tobacco usage occasions, among others. The company also continues to assess the impacts of any supply-chain or distribution-related disruption. Cigarette shipment volumes, in general, are being affected by anti-tobacco campaigns and increased consumer awareness regarding the harmful impacts of tobacco consumption. Regulatory hurdles (discussed below) are also a vital factor limiting the marketing of cigarettes, thereby adversely impacting its sales volume.
Apart from this, on Nov 29, 2021, the importation ban and cease-and-desist orders forced by the International Trade Commission on the IQOS device, Marlboro HeatSticks and infringing components went into effect. The IQOS system is not available for sale any longer in the United States. On its fourth-quarter earnings call, Altria stated that it does not expect PM USA to have access to IQOS devices or Marlboro HeatSticks in 2022.
However, we believe that the abovementioned upsides are likely to continue backing growth for this Zacks Rank #3 (Hold) company, which has rallied 16.5% in the past six months compared with the industry’s upside of 10.2%.
Looking for Consumer Staple Stocks? Check These
Some better-ranked stocks are Tyson Foods (TSN - Free Report) , Flowers Foods (FLO - Free Report) and Pilgrim’s Pride (PPC - Free Report) .
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen, and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). Shares of Pilgrim’s Pride have moved down 14.5% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial-year earnings per share (EPS) suggests growth of 19.7% from the year-ago reported number. PPC has a trailing four-quarter earnings surprise of 24.9%, on average.
Tyson Foods, a renowned meat products company, carries a Zacks Rank #2 (Buy) at present. Shares of Tyson Foods have jumped 16% in the past six months.
The Zacks Consensus Estimate for Tyson Foods’ current financial-year sales and EPS suggests growth of 9.5% and 5.6%, respectively, from the year-ago reported number. TSN has a trailing four-quarter earnings surprise of 32.2%, on average.
Flowers Foods, the producer and marketer of packaged bakery products, currently carries a Zacks Rank #2. Shares of Flowers Foods have risen 8.2% in the past six months.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and EPS suggests growth of 7.2% and roughly 4%, respectively, from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of around 6%, on average.