Core Insights - Philip Morris International (PM) has seen significant growth in its e-vapor brand VEEV, with shipment volumes more than doubling year over year in Q2 2025, reaching nearly 1.5 billion equivalent units in the first half of 2025, positioning VEEV as a key growth driver alongside IQOS and ZYN [1][9] Group 1: VEEV Brand Performance - VEEV is leading the closed pod market in six European countries, including Italy and Greece, driven by a profitability-focused rollout strategy that enhances consumer loyalty and repeat purchase rates [2][9] - The recent launch of VEEV inPRIME in the Czech Republic aims to improve user experience with enhanced flavor, larger vapor clouds, and extended battery life, reinforcing VEEV's premium positioning [3][9] - Early traction for VEEV in markets outside Europe, such as Indonesia, Canada, and Colombia, indicates its global growth potential, supported by PM's multi-category infrastructure [4][5] Group 2: Competitive Landscape - Altria Group is revamping its NJOY product line to re-enter the e-vapor market but faces regulatory challenges and patent litigation that may hinder its progress [6] - Turning Point Brands reported nearly 10x year-over-year growth in white nicotine pouch sales, generating $22.3 million in revenues in Q1 2025, and raised its full-year sales guidance to $80-$95 million, reflecting strong consumer demand [7] Group 3: Financial Performance and Estimates - PM's shares have declined by 10% in the past month, contrasting with the industry's decline of 2.9% [8] - PM's forward price-to-earnings ratio stands at 20.3X, higher than the industry's average of 14.7X [10] - The Zacks Consensus Estimate indicates year-over-year earnings growth of 14% for 2025 and 12% for 2026, with current estimates for 2025 earnings at $7.49 per share [11][12]

Valuation and Performance - Altria Group, Inc. (MO) trades at a forward 12-month price-to-earnings (P/E) ratio of 11.01, which is a 24% discount compared to the Zacks Tobacco industry average of 14.49 [1] - Over the past 12 months, Altria stock has returned 37.1%, significantly underperforming the industry average of 54.3% [3] - The stock's performance is notably weaker compared to competitors like Philip Morris International Inc. (65.8% return) and Turning Point Brands, Inc. (106.1% return) [3] Market Challenges - Altria faces a decline in cigarette consumption, with smoking rates at historic lows, leading to a shrinking core customer base [6] - The company’s traditional cigarette market share is under pressure due to falling shipment volumes, which declined by 8.8% in Q4 2024 [9] - Younger demographics are increasingly turning away from traditional cigarettes, favoring smoke-free alternatives, compounded by the rise of illicit e-vapor products [7][8] Regulatory and Competitive Landscape - The U.S. Food and Drug Administration (FDA) has tightened marketing restrictions, adding to Altria's challenges [8] - The e-vapor category grew by around 30% in 2024, with illegal products accounting for over 60% of total category sales, undermining Altria's market expansion efforts [11][12] - Altria's Smoke-Free Strategy is hindered by the rapid rise of illicit flavored disposable e-vapor products, complicating regulatory enforcement [10][12] Financial Outlook - The Zacks Consensus Estimate for Altria's earnings per share has been revised downward over the past 30 days, indicating a bearish outlook among analysts [13] - Current estimates for earnings per share are 1.17 for the current quarter and 5.28 for the current year, reflecting a downward trend from previous estimates [13] Conclusion - The combination of declining cigarette volumes, regulatory hurdles, and the growing popularity of illicit e-vapor products presents a challenging outlook for Altria [14] - Until there is evidence of a successful transition to a more sustainable product mix, the stock's discount is likely to persist, leading to a cautious stance on new investments [14]