Industry Overview - The tobacco industry is experiencing a strong year, contrary to the belief that it is shrinking, with significant sales growth in non-cigarette products [1] - The FDA has agreed to fast-track the approval process for nicotine pouches, a move influenced by the White House, indicating a favorable regulatory environment for the industry [1][3] Product Development - The FDA has historically taken a long time to approve new nicotine delivery methods, but recently approved 20 flavors of Zyn, a leading nicotine pouch brand owned by Philip Morris International, after a five-year review [2] - The agency is now expediting the approval process for pouch products from four industry leaders, with potential legal launches expected by December [3] Financial Performance - A basket of six global tobacco stocks has yielded an average total return of 43% year-to-date, showcasing strong market performance [6] - Philip Morris International reported a 32% year-over-year increase in shipments of oral smoke-free products, surpassing 200 million cans in the Americas [6] - Altria reported a 26% year-over-year growth in shipments of its Zyn competitor, with its share price up 27% year-to-date [6] Historical Context - The tobacco industry has historically outperformed all other sectors in the US from 1900 to 2015, providing financial benefits to municipalities through securitized payments from major tobacco companies [4]

Core Insights - Altria Group, Inc. is focusing on the growing nicotine pouch market, with its on! brand leading the way, achieving a 26.5% year-over-year increase in shipments to 52.1 million cans in Q2 2025, and capturing an 8.7% share of the U.S. oral tobacco market [1][8] - The U.S. nicotine pouch category has grown by 52%, indicating a significant shift in consumer preferences towards this product type [1] - Altria's marketing efforts have successfully reached over 170,000 adult tobacco consumers, increasing brand awareness by 7 percentage points [2][8] Shipment and Earnings Performance - The oral tobacco segment reported a 10.9% increase in adjusted operating companies income (OCI) year-over-year, with margins expanding from 65.6% to 68.7% [3][8] - The on! brand captured a 16.7% market share in Q2 and 17.3% in the first half of 2025, demonstrating strong growth momentum [1] Competitive Landscape - Competition in the nicotine pouch category is intensifying, with Philip Morris International's ZYN brand experiencing a 26% growth in U.S. offtake and a 43% increase globally [5] - Turning Point Brands, Inc. has seen its Modern Oral sales increase nearly eightfold year-over-year to $30.1 million in Q2 2025, positioning itself as a fast-growing competitor in the market [6] Valuation and Estimates - Altria's shares have increased by 8.5% over the past month, outperforming the industry growth of 3.9% [7] - The company trades at a forward price-to-earnings ratio of 12.2X, lower than the industry's average of 15.35X [10] - The Zacks Consensus Estimate for Altria's earnings per share for 2025 and 2026 has increased by one cent each to $5.39 and $5.55, respectively [11]