Shares of
Altria Group
were rising after the maker of Marlboro cigarettes topped quarterly sales estimates, and said it would buy back $1 billion of stock.
Altria posted fourth-quarter adjusted earnings per share of $1.18, in line with the consensus Wall Street estimate, according to FactSet, and flat from a year ago.
Sales of $5.98 billon beat estimates for $5.1 billion, but declined 2.2% from a year ago, “primarily driven by lower net revenues in the smokable products segment, partially offset by higher net revenues in the oral tobacco products segment,” according to Altria’s release.
Altria expects to deliver 2024 full-year adjusted diluted earnings per share in a range from $5.00 to $5.15, a growth rate of 1% to 4% from a $4.95 base in 2023. Analysts were expecting earnings of $5.07 a share for the full year.
E-vapor continues to be the most popular smoke-free products, and grew about 35% last year, said Altria CEO Billy Gifford in an earnings call with analysts. But much of the growth was driven by illicit flavored disposable products that now makes up half of the market share.
“The current state of the market is intolerable for both legitimate manufacturers and consumers,” said Gifford, “These products are being distributed by companies violating virtually every rule and guidance the Food and Drug Administration has issued since 2016.”
The company is actively working with regulators, lawmakers, and trade partners to address the challenge. In October, Altria’s e-cigarette subsidiary NJOY sought injunctions against a number of e-vapor manufacturers.
Still, management was upbeat about the smokeless market’s outlook. “While we’re deeply concerned about growth in illicit product use, we are encouraged that adult smokers continue to transition to smoke-free alternatives, which now represent approximately 40% of the space,” Gifford said during the call.
Inflation and high debt levels have led to less discretionary income for tobacco consumers, but Altria’s signature brand Marlboro has displayed resilience, management says. The company has also made promotional investments to improve brand loyalty during times of economic uncertainty.
Altria has been boosting shareholder gains through generous share buybacks and dividend payments.
In 2023, the tobacco giant returned $1 billion in cash to shareholders through the repurchase of 22.7 million shares at an average price of $43.96 each. This year should look similar—the company’s board has authorized a new $1 billion share-repurchase program, which it expects to complete by the end of 2024.
Altria also remains a solid dividend payer. The firm raised its dividend by 4.3% in August, the 58th increase in the past 54 years. The company said it paid dividends of $1.7 billion in the fourth quarter and $6.8 billion in 2023.
Altria stock was up 3.1% to $41.36 as of noon Thursday, while the
S&P 500
was up 0.73%. Over the last 12 months, Altria shares have fallen 13%.
In December,
British American Tobacco,
which makes Lucky Strike and Dunhill, announced a massive $32 billion write-down of its cigarette brands. The move triggered a sharp selloff not only in BAT stock, but also its American peers such as Altria and Philip Morris.
Tobacco companies have been transitioning from traditional combustible cigarettes to smokeless products, but Altria has taken a particularly lengthy and painful path.
In 2018, Altria acquired a 35% share in e-vaping company JUUL Labs with a $12.8 billion investment. But Juul has since gotten entangled in lawsuits regarding its role in youth vaping, as the firm was accused of aggressively marketing to teens.
By the end of 2022, the estimated value of Altria’s JUUL investment dwindled to just $250 million, according to the firm. Last March, Altria announced that it had exchanged the JUUL stake for a nonexclusive global license to some of the startup’s intellectual property for heated tobacco.
Three months later, Altria bought NJOY, one of the few e-cigarette makers with clearance from federal regulators, to develop its own products.
The lack of growth has kept Altria shares range-bound over the past 18 months. But Wall Street analysts still see upside in the stock, with an average target price of $47. That’s nearly 18% above the current level.
Write to Evie Liu at [email protected] and Emily Dattilo at [email protected]
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