Can Pricing Power Offset Soft Cigarette Volumes at Altria?

Core Insights - Altria Group, Inc. is facing significant challenges in the smokeable products segment, with a reported 10% decrease in domestic cigarette shipment volume in 2025, attributed to illicit e-vapor products and pressures on discretionary income for adult nicotine consumers [1][8] - Despite these volume declines, Altria's aggressive pricing strategy has helped maintain profitability, resulting in a 1.5% increase in reported operating companies income (OCI) for the smokeable products segment in 2025 [2][3] - The adjusted OCI margin for the smokeable products segment expanded by 1.8 percentage points to 63.4% in 2025, indicating that pricing strategies are partially offsetting the impact of lower shipment volumes [3][8] Pricing and Volume Dynamics - The interaction between pricing and volume trends is critical for Altria's cigarette business, with future pricing power dependent on consumer demand, competitive conditions, and broader industry trends [4] - Altria's peers, such as Philip Morris International Inc., are also relying on strong pricing to mitigate volume pressures, with a 3.2% decline in cigarette shipment volumes but an 8% increase in pricing, leading to a 1% rise in organic net revenues [5] - Turning Point Brands, Inc. is shifting focus from traditional products to the "Modern Oral" segment, achieving a 31.2% increase in net sales, driven by a 627.6% year-over-year increase in Modern Oral sales [6] Valuation and Earnings Estimates - Altria's shares have increased by 13.9% in the past month, outperforming the industry growth of 11.5% [7] - The company trades at a forward price-to-earnings ratio of 11.48X, which is lower than the industry average of 15.74X [9] - The Zacks Consensus Estimate for Altria's 2026 earnings per share has decreased by 1 cent to $5.57, while the estimate for 2027 has increased by 4 cents to $5.75 [10]