Altria Surpasses Quarterly Profit Expectations With Price Hikes and Nicotine Alternatives

Altria Stock

Altria (NYSE:MO), the manufacturer of Marlboro cigarettes, exceeded expectations for its adjusted fourth-quarter profits, driven by increased pricing and a strategic shift towards alternative nicotine products. The company faced challenges from declining demand for traditional tobacco products amidst global regulatory pressures, competition from vaping alternatives, and growing awareness of health risks associated with conventional tobacco.

During premarket trading, Altria’s shares experienced a 1% increase. The company also outlined its 2024 adjusted profit projections, aligning with market expectations, and disclosed a new $1 billion share repurchase initiative. In response to the competitive landscape, Altria had implemented price hikes over several quarters, particularly in the face of dwindling demand for traditional cigarettes in the United States, where e-cigarettes have gained popularity.

Altria’s strategic focus on diversification includes investments in tobacco alternatives like NJOY vapes, responding to evolving consumer preferences for nicotine consumption. The reported shipment volume for NJOY consumables reached approximately 11.1 million units, a significant increase from the previous quarter’s 7.5 million pods.

For the fourth quarter, Altria reported an adjusted profit of $1.18 per share, slightly surpassing the expected $1.17 according to LSEG data. The company anticipates a 1% to 4% rise in adjusted profit per share for 2024, projecting a range of $5 to $5.15. Analysts, on the other hand, had predicted a full-year profit per share of $5.08.

Altria has faced challenges amid tough economic conditions, witnessing some customers migrating to more affordable tobacco brands. In its smokable products division, quarterly net revenues experienced a 3.3% decline due to increased promotions, accompanied by a 7.6% reduction in domestic cigarette shipment volumes.

Similar to industry peer Philip Morris, Altria has ventured into tobacco-free nicotine pouches, which have gained traction against traditional oral tobacco products like Copenhagen and Skoal. While shipment volume for Altria’s on! nicotine pouches grew by 32.8% in the reported quarter, it marked a slight deceleration compared to the 36.7% rise in the previous quarter.

The company’s fourth-quarter revenue, net of taxes, witnessed a 1.2% decrease, reaching $5.02 billion, slightly below LSEG expectations of $5.06 billion.

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