Will Altria's Smoke-Free Bets Deliver Long-Term Revenue Lift?

Core Insights - Altria Group, Inc. is committed to transitioning towards a smoke-free future, with a focus on its oral tobacco portfolio, particularly the on! nicotine pouch brand, which has shown significant growth in shipment volumes and market share [1][2][9] - The company's oral tobacco revenues increased by 0.5% to $654 million in Q1 2025, driven by pricing power despite macroeconomic challenges [2] - Altria faces challenges in the vapor segment, particularly after regulatory issues led to the discontinuation of its NJOY ACE product, but plans to introduce compliant alternatives [3][4] Oral Tobacco Performance - The on! nicotine pouch brand's shipment volumes rose 18% year-over-year, exceeding 39 million cans, and its market share in the oral tobacco category increased by 1.8 percentage points to 8.8% [1][9] - The nicotine pouch market share for on! reached 17.9%, indicating strong consumer loyalty and brand strength despite retail price increases [1] Vapor Segment Challenges - Regulatory setbacks have impacted Altria's vapor products, leading to the discontinuation of NJOY ACE, but the company is working on launching new compliant products to regain market share [3][4] Competitive Landscape - Altria competes with Philip Morris International and British American Tobacco in the smoke-free category, both of which are also focusing on reduced-risk products [5][6][7] - Philip Morris reported a 20.4% increase in net revenues and a 33.1% rise in smoke-free gross profit, with significant growth in its ZYN and VEEV products [6] - British American Tobacco aims for 50 million consumers by 2030 and reported a 2.5% increase in New Category revenues in 2024 [7] Financial Performance and Valuation - Altria's stock has gained 12.5% year-to-date, while the industry has grown by 37.7% [8] - The company trades at a forward price-to-earnings ratio of 10.76X, below the industry average of 15.36X [11] - Earnings estimates for 2025 and 2026 suggest year-over-year growth of 4.9% and 3.3%, respectively, with recent upward revisions [12]