MO Expands Smokeable Margins to 64% as Cigarette Volumes Fall 9%

Core Insights - Altria Group, Inc. experienced a paradox in its smokeable business during Q3 2025, with cigarette shipments declining while profitability increased [1] - The adjusted margin for the smokeable segment rose to 64.4%, indicating a consistent upward trend despite a 9% drop in domestic cigarette volumes [1][8] Pricing and Profitability - Price realization was the main driver of profitability, with higher list prices compensating for volume declines, leading to an adjusted operating income of $2,956 million for the quarter [2][8] - Marlboro's stability in the premium tier allowed Altria to increase its market share to 59.6%, a 0.3-point gain from the previous year [2] Margin Expansion Factors - Margin expansion was aided by lower per-unit settlement charges and effective control of operating expenses, which helped mitigate the impact of increased promotions and a shift towards discount brands [3] - Altria's data-driven pricing and product-mix strategies enabled the company to maintain strong profitability despite volume challenges [3][4] Competitive Landscape - Philip Morris International Inc. reported a 4.3% growth in combustible net revenue and a 7.7% increase in gross profit, despite a 3.2% decline in cigarette shipments, showcasing its pricing strength and market mix [5] - Turning Point Brands, Inc. saw a 39.7% year-over-year increase in gross profit, driven by significant growth in its Stoker's segment, indicating strong category fundamentals [6] Stock Performance and Valuation - Altria's shares increased by 0.7% over the past month, contrasting with a 1.6% decline in the industry [7] - The company trades at a forward price-to-earnings ratio of 10.44X, lower than the industry average of 13.83X, suggesting potential valuation attractiveness [10] Earnings Estimates - The Zacks Consensus Estimate for Altria's 2025 earnings per share has risen by 1 cent to $5.44, while the estimate for 2026 has decreased by 1 cent to $5.56 [11]