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Altria's (MO) Q2 Earnings Coming Up: Buy, Sell or Hold Steady?
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Altria Group, Inc. (MO - Free Report) is scheduled to report second-quarter 2024 earnings on Jul 31. The Zacks Consensus Estimate for revenues is pegged at $5.43 billion, which indicates a 0.2% dip from the year-ago period.
Image Source: Zacks Investment Research
However, the bottom line is likely to have increased year over year. The consensus mark for earnings has remained unchanged in the past 30 days at $1.35 per share, which implies 3.1% growth from the year-ago quarter’s figure. MO has a trailing four-quarter negative earnings surprise of 0.2%, on average.
Our proven model doesn’t conclusively predict an earnings beat for Altria this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Altria currently carries a Zacks Rank #3, while it has an Earnings ESP of -1.66%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors to Note
Altria has been benefiting from the strength of its flagship brand, Marlboro. Despite facing challenges, Marlboro continues to dominate the U.S. cigarette market with a 42% retail share in the first quarter of 2024 and is likely to contribute positively to the upcoming results.
Strong pricing power has also been working well for the company. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes. Pricing has been shielding Altria amid low cigarette volumes.
We note that 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. In the last reported quarter, domestic cigarette shipment volumes tumbled 10%, mainly due to the industry’s decline rate and retail share losses. The industry’s decline was a result of macroeconomic pressure on ATC disposable income and increases in illegitimate e-vapor products. These headwinds pose concerns for the quarter under review.
That said, Altria’s efforts to strengthen its position in the smoke-free products space have been a driver, as consumers are increasingly gravitating toward reduced-risk products or are driven by the well-documented health risks associated with traditional cigarette smoking. In response to the evolving market dynamics, 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.
on! has been a valuable addition to the company'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. Additionally, Altria’s e-vapor product, NJOY, has shown significant early momentum in its commercialization.
Tobacco behemoth, Philip Morris International (PM - Free Report) , has also been reinforcing its presence in the smoke-free market with well-known products like IQOS and ZYN. Coming back to Altria, we believe that strength in smoke-free products is likely to have been an upside in the second quarter.
However, the investments associated with enhanced smoke-free product research, development and marketplace activities to support the company’s smoke-free products may have affected margins.
Price Performance & Valuation
Driven by its robust fundamentals and attractive dividend payouts, shares of Altria have surged 24.6% in the past six months compared with the industry’s growth of 24.5%. Altria has also fared better than the broader Zacks Consumer Staples sector and the S&P 500’s respective gains of 4% and 10.8% in the same time frame.
Image Source: Zacks Investment Research
Altria is currently trading at a premium compared to its industry peers like British American Tobacco p.l.c. (BTI - Free Report) and Japan Tobacco Inc. (JAPAY - Free Report) . Altria’s forward 12-month price-to-sales ratio stands at 4.20, higher than the industry’s ratio of 3.35. This suggests that investors may be paying a high price relative to the company's expected sales growth. Altria’s Value Score of C further underscores these fears.
Image Source: Zacks Investment Research
Investment Thesis
Altria has been benefiting from the resilience of its Marlboro brand as well as strong pricing power. The company’s expansion into smoke-free products, such as on! nicotine pouches and NJOY e-vapor, shows promising growth.
However, MO's core business remains in traditional cigarettes, which has been facing declining volumes and increased competition from illicit e-vapor products. Regulatory risks and shifting consumer preferences add further uncertainty. Investors should carefully weigh these factors, balancing the potential gains against the underlying challenges. Current shareholders might consider holding their positions, while new investors could benefit from waiting for a more favorable entry point.
Image: Bigstock
Altria's (MO) Q2 Earnings Coming Up: Buy, Sell or Hold Steady?
Altria Group, Inc. (MO - Free Report) is scheduled to report second-quarter 2024 earnings on Jul 31. The Zacks Consensus Estimate for revenues is pegged at $5.43 billion, which indicates a 0.2% dip from the year-ago period.
Image Source: Zacks Investment Research
However, the bottom line is likely to have increased year over year. The consensus mark for earnings has remained unchanged in the past 30 days at $1.35 per share, which implies 3.1% growth from the year-ago quarter’s figure. MO has a trailing four-quarter negative earnings surprise of 0.2%, on average.
Altria Group, Inc. Price and EPS Surprise
Altria Group, Inc. price-eps-surprise | Altria Group, Inc. Quote
What the Zacks Model Unveils
Our proven model doesn’t conclusively predict an earnings beat for Altria this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Altria currently carries a Zacks Rank #3, while it has an Earnings ESP of -1.66%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors to Note
Altria has been benefiting from the strength of its flagship brand, Marlboro. Despite facing challenges, Marlboro continues to dominate the U.S. cigarette market with a 42% retail share in the first quarter of 2024 and is likely to contribute positively to the upcoming results.
Strong pricing power has also been working well for the company. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases owing to the addictive quality of cigarettes. Pricing has been shielding Altria amid low cigarette volumes.
We note that 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. In the last reported quarter, domestic cigarette shipment volumes tumbled 10%, mainly due to the industry’s decline rate and retail share losses. The industry’s decline was a result of macroeconomic pressure on ATC disposable income and increases in illegitimate e-vapor products. These headwinds pose concerns for the quarter under review.
That said, Altria’s efforts to strengthen its position in the smoke-free products space have been a driver, as consumers are increasingly gravitating toward reduced-risk products or are driven by the well-documented health risks associated with traditional cigarette smoking. In response to the evolving market dynamics, 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.
on! has been a valuable addition to the company'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. Additionally, Altria’s e-vapor product, NJOY, has shown significant early momentum in its commercialization.
Tobacco behemoth, Philip Morris International (PM - Free Report) , has also been reinforcing its presence in the smoke-free market with well-known products like IQOS and ZYN. Coming back to Altria, we believe that strength in smoke-free products is likely to have been an upside in the second quarter.
However, the investments associated with enhanced smoke-free product research, development and marketplace activities to support the company’s smoke-free products may have affected margins.
Price Performance & Valuation
Driven by its robust fundamentals and attractive dividend payouts, shares of Altria have surged 24.6% in the past six months compared with the industry’s growth of 24.5%. Altria has also fared better than the broader Zacks Consumer Staples sector and the S&P 500’s respective gains of 4% and 10.8% in the same time frame.
Image Source: Zacks Investment Research
Altria is currently trading at a premium compared to its industry peers like British American Tobacco p.l.c. (BTI - Free Report) and Japan Tobacco Inc. (JAPAY - Free Report) . Altria’s forward 12-month price-to-sales ratio stands at 4.20, higher than the industry’s ratio of 3.35. This suggests that investors may be paying a high price relative to the company's expected sales growth. Altria’s Value Score of C further underscores these fears.
Image Source: Zacks Investment Research
Investment Thesis
Altria has been benefiting from the resilience of its Marlboro brand as well as strong pricing power. The company’s expansion into smoke-free products, such as on! nicotine pouches and NJOY e-vapor, shows promising growth.
However, MO's core business remains in traditional cigarettes, which has been facing declining volumes and increased competition from illicit e-vapor products. Regulatory risks and shifting consumer preferences add further uncertainty. Investors should carefully weigh these factors, balancing the potential gains against the underlying challenges. Current shareholders might consider holding their positions, while new investors could benefit from waiting for a more favorable entry point.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.