It has been about a month since the last earnings report for Altria (MO Quick QuoteMO - Free Report) . Shares have added about 6.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Altria due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Altria's Q2 Earnings Lag Estimates, Cigarette Volumes Drop

Altria Group posted second-quarter 2024 results, wherein adjusted earnings came in at $1.31 per share, which remained flat year over year and lagged the Zacks Consensus Estimate of $1.35. Reduced adjusted operating companies income (OCI) was offset by a lesser number of shares outstanding.

The company posted net revenues of $6,209 million, which declined 4.6% year over year. The downside can mainly be attributed to reduced net revenues in the smokeable products unit, somewhat made up by increased net revenues across the oral tobacco products segment. Revenues, net of excise taxes, fell 3% to $5,277 million. The consensus mark stood at $5,427 million.

Smokeable Products: Net revenues in the category decreased 5.6% year over year to $5,495 million, mainly due to reduced shipment volume and increased promotional investments. These were somewhat offset by higher pricing. Revenues, net of excise taxes, fell 4%. Domestic cigarette shipment volumes tumbled 13%, mainly due to the industry’s decline rate, retail share losses and trade inventory movements. The industry’s decline was a result of macroeconomic pressure on Adult Tobacco Consumers’ (“ATC”) discretionary income and increases in illegitimate e-vapor products.  Altria’s reported cigar shipment volumes dipped 0.9%.

Adjusted OCI in the segment declined 2% to $2,827 million due to lower shipment volumes, increased promotional investments, elevated per-unit settlement charges and escalated manufacturing costs. These were somewhat countered by improved pricing and reduced selling, general and administrative (SG&A) costs. The adjusted OCI margins grew 1.2 percentage points to 61.6%.

Oral Tobacco Products: Net revenues in the segment rose 4.6% from the year-ago quarter’s level to $711 million. The upside can be attributed to improved pricing and reduced promotional investments, partly negated by the increased percentage of on! shipment volumes relative to MST and reduced MST shipment volumes. Revenues, net of excise taxes, grew 5.5%.

Domestic shipment volumes plunged 1.8%, mainly due to retail share losses. This was somewhat offset by the industry’s growth rate, trade inventory movements and other aspects. Adjusted OCI increased 1.8% to $451 million, mainly due to increased pricing and a decline in promotional investments, somewhat negated by elevated costs, reduced MST shipment volume and mix change. Adjusted OCI margins contracted by 2.4 percentage points to 65.6%.

Other Updates

Altria ended the quarter with cash and cash equivalents of $1,799 million, long-term debt of $23,470 million and a total stockholders’ deficit of $3,016 million. During the first half of 2024, the company returned more than $5.8 billion to shareholders through dividends and share buybacks. Dividends paid amounted to $1.7 billion in the second quarter and $3.4 billion in the first half.

Further, Altria concluded its accelerated share repurchase program of $2.4 billion, which was announced in the first quarter. As of Jun 30, 2024, the company had shares worth $990 million remaining under its existing authorized $3.4 billion share buyback program.

Guidance

For 2024, MO now 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. Earlier, the company projected 2024 adjusted EPS to come in the range of $5.05-$5.17, which indicated 2-4.5% growth. 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.

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.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Altria has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Altria has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Altria is part of the Zacks Tobacco industry. Over the past month, Philip Morris (PM Quick QuotePM - Free Report) , a stock from the same industry, has gained 4.3%. The company reported its results for the quarter ended June 2024 more than a month ago.

Philip Morris reported revenues of $9.47 billion in the last reported quarter, representing a year-over-year change of +5.6%. EPS of $1.59 for the same period compares with $1.60 a year ago.

Philip Morris is expected to post earnings of $1.83 per share for the current quarter, representing a year-over-year change of +9.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Philip Morris. Also, the stock has a VGM Score of C.