Core Viewpoint - Altria Group is experiencing a resurgence in stock performance, with a 30% total return for shareholders in 2025, outperforming the market over the past five years [1] Financial Performance - Altria's dividend yield is currently at 6.25%, significantly higher than the market average, providing stable cash flows to investors [2] - Despite a 10% year-over-year decline in cigarette volumes, Altria's smokeable products segment grew operating earnings by 4.4% to $2.9 billion, driven by price increases and growth in the cigars segment [3][4] - The company has reduced its shares outstanding by 14% over the last five years through stock buybacks, which supports an increase in dividend per share [7][8] Strategic Initiatives - Altria is focusing on alternative nicotine products to drive long-term growth, having acquired the NJOY electronic vaping brand and seeing a 26.5% year-over-year volume growth in its On! nicotine pouch brand [10][11] - Management has time to invest in these new categories before traditional cash flows from cigarettes diminish, but significant growth in these areas will be necessary for future relevance [12] Investment Considerations - Altria is recommended for its current dividend yield and growth potential, while investors should monitor the performance of its new nicotine products for signs of success [13]

Altria's Second-Quarter and First-Half 2025 Earnings Conference Call July 30, 2025 1 | ALCS | Q2 2025 | 7.30.25 | For Investor Purposes ONLY Safe Harbor Statement Statements, including earnings guidance, in this presentation that are not reported financial results or other historical information are "forward-looking statements" within the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees ...

Core Insights - Altria Group, Inc. (MO) is trading at a significant discount compared to industry peers and the broader market, presenting a potential value opportunity for long-term investors [1][3] - The stock has a forward 12-month price-to-earnings (P/E) ratio of 10.81, lower than the industry average of 15.73 and the S&P 500's average of 21.85, supported by a Zacks Value Score of B [1][3] - Despite favorable valuations, Altria's stock performance has lagged behind competitors and the industry average [4] Valuation and Performance - Altria's relative undervaluation is highlighted when compared to competitors like Philip Morris International Inc. (PM) and Turning Point Brands (TPB), which have forward P/E ratios of 21.18 and 21.07, respectively [3] - Altria's stock has gained 1.8% over the past three months, underperforming the industry average growth of 17.1% and the S&P 500's return of 5.4% [4] - As of June 17, 2025, Altria stock closed at $58.99, approximately 3.7% below its 52-week high of $61.26, and is trading above both its 50-day and 200-day moving averages, indicating bullish momentum [7][8] Growth Strategy - Altria is focusing on a smoke-free future, with its oral nicotine pouch brand on! showing significant growth, with shipments rising 18% year over year [12] - The brand gained market share in both the oral tobacco category and nicotine pouch market, reflecting strong brand equity and consumer loyalty [12] - Pricing power is a critical aspect of Altria's growth strategy, with strategic price increases helping to offset declines in traditional cigarette volumes [13] Financial Outlook - Altria projects adjusted earnings per share (EPS) for 2025 between $5.30 and $5.45, indicating up to 5% year-over-year growth from a base of $5.19 in 2024 [13] - The Zacks Consensus Estimate for EPS has seen upward revisions, with the current year estimate increasing by 4 cents to $5.39 and next year's estimate rising by a cent to $5.55 [15] - Current projections suggest year-over-year EPS growth of 5.3% this year and 3% next year [15] Strategic Initiatives - Altria has launched the "Optimize & Accelerate" initiative aimed at improving speed, agility, and cost efficiency to support its smoke-free transformation [14] - The company is retooling its e-vapor platform through NJOY, focusing on regulated vapor products that align with consumer preferences [14] - These strategic moves position Altria to lead in the next generation of nicotine innovation [14] Investment Consideration - Given Altria's attractive valuation, solid earnings outlook, and strategic focus on smoke-free products, the stock is well-positioned for value-focused investors [17] - Despite regulatory challenges and market competition, Altria's strong pricing power and favorable analyst revisions suggest a compelling long-term opportunity in the tobacco industry [17]

Core Insights - Altria Group, Inc. is experiencing significant challenges in its smokeable products segment, with a notable decline in cigarette volumes and revenues [1][8] - The overall tobacco industry is facing economic pressures, leading to a shift towards discount brands and an increase in illicit e-vapor products [2][3] Company Performance - In Q1 2025, Altria's domestic cigarette shipment volumes decreased by 13.7%, while net revenues from the smokeable segment fell by 5.8% year over year to $4.62 billion [1][8] - The company's total revenues dropped by 5.7% in the same quarter, reflecting the impact of economic strain on consumers [2] Market Dynamics - Inflation and stagnant wage growth are pushing low-income smokers towards cheaper alternatives, resulting in a 1.8 share point gain for the discount cigarette segment [2] - Altria's flagship Marlboro brand experienced a 1-point decline in retail share year over year [2] Competitive Landscape - The illegal disposable e-vapor market is estimated to dominate over 60% of the e-vapor market, further impacting traditional cigarette demand [3] - Competitors like Philip Morris International and British American Tobacco are also facing structural pressures in their combustible segments, with both companies pivoting towards reduced-risk products (RRPs) [5][6] Strategic Response - Altria may need to accelerate its transition to smoke-free alternatives to sustain growth and investor confidence, as evidenced by its investments in platforms like NJOY and on! [4] - The company’s current valuation shows a forward price-to-earnings ratio of 10.73X, below the industry average of 15.47X, indicating potential undervaluation [10] Earnings Estimates - The Zacks Consensus Estimate for Altria's 2025 earnings implies a year-over-year growth of 5.3%, with a 3% uptick expected in 2026 [12]

Investment Rating - The report indicates a positive outlook for the new tobacco products industry, with a focus on the growth potential of smokeless tobacco and nicotine pouch segments [8]. Core Insights - The global market for new tobacco products is projected to reach $86.96 billion in 2024, reflecting a year-on-year growth of 13.1%, with significant contributions from smokeless tobacco, vaping, heated tobacco, and oral nicotine products [2][17]. - The report highlights the strong performance of smokeless tobacco and nicotine pouch products, with the latter expected to grow by 51.0% year-on-year in 2024 [2][3]. - The market dynamics are shifting, with North America, Western Europe, and Asia-Pacific regions showing robust growth, particularly in the U.S., which remains the largest market for new tobacco products [23][24]. Summary by Sections 1. Global Market Overview - The new tobacco products market is expanding steadily, with a compound annual growth rate (CAGR) of 16.8% from 2017 to 2024 [17]. - By 2025, the market is expected to continue its growth trajectory, with projections indicating increases across all product categories [2][17]. 2. Nicotine Pouches - The global nicotine pouch market is experiencing rapid growth, with a projected market size of 21.2 billion pouches in 2024, marking a 37% increase year-on-year [3]. - Major tobacco companies dominate this segment, with significant market shares held by PMI, BAT, and Altria [3]. 3. Philip Morris International (PMI) - PMI's revenue from new tobacco products is expected to reach $14.66 billion in 2024, a 17.0% increase, with heated tobacco product shipments growing by 11.5% [4]. - The number of PMI's new tobacco users has reached 32.2 million, with a 72.0% replacement rate of traditional cigarette consumers [4]. 4. British American Tobacco (BAT) - BAT is accelerating its "smokeless strategy," with its modern oral tobacco segment showing a 47% revenue increase [5]. - The launch of the Glo Hilo product is anticipated to disrupt the current heated tobacco market dynamics [5]. 5. Altria - Altria's NJOY brand has shown significant growth, with a 15.3% increase in sales volume in 2024 [6]. - The on! brand also experienced a 40.2% increase in sales, indicating a strong performance in the oral nicotine segment [6]. 6. Imperial Brands - Imperial Brands reported a 24.2% revenue increase in its new tobacco segment, driven by strong performance in Europe [6]. - The company is actively launching new products to cater to changing consumer preferences [6]. 7. Japan Tobacco - Japan Tobacco's new tobacco revenue is projected to reach 989 billion yen in 2024, reflecting a 21.1% increase [7]. - The Ploom brand is expanding its presence in emerging markets, contributing to overall sales growth [7]. 8. Investment Recommendations - The report recommends focusing on companies like Smoore International, which is well-positioned to benefit from the expanding vaping market and partnerships with major players like BAT and NJOY [8].

Oral Tobacco & on! - Oral tobacco industry volume grew by 1.5% [12] - on! shipment volume increased by 18.0% to 39.3 million cans in Q1 2025 [12] - on! share of the oral tobacco category reached 8.8% in Q1 2025, a 1.8 percentage point increase [15] - on! brand impressions grew approximately 5x, reaching ~200 million in Q1 2025 [19] E-Vapor - Disposable e-vapor products continue to drive category growth, with past 30-day usage increasing from ~18.0 million to ~20.5 million [22] - The company is advocating for regulatory reforms and engaging with Congress to address illicit e-vapor products [28] - NJOY U S International Trade Commission (ITC)'s exclusion order and cease-and-desist orders took effect on March 31 [31] Financial Performance - Smokeable Products Segment Adjusted OCI increased by 2.7% to $2518 million in Q1 2025 [37] - Smokeable Products Segment Adjusted OCI Margins increased by 4.2 percentage points to 64.4% in Q1 2025 [37] - The company paid $1.7 billion in dividends in the first quarter [67] - The company repurchased 5.7 million shares for $326 million [69]

Core Insights - Altria Group and Philip Morris International both produce and sell Marlboro cigarettes, but they operate in different markets, with Altria focusing on North America and Philip Morris on international markets [1][6][7] Company Performance - Altria's cigarette volumes fell by 10.2% in 2024, continuing a negative trend, while Philip Morris saw a 0.6% increase in cigarette volumes in 2025, indicating a more favorable business performance for Philip Morris [8] - Altria has made several strategic mistakes, including the spin-off of Philip Morris, which is now seen as a loss of its best business segment [9][11] Market Positioning - Tobacco companies are classified as consumer staples, but unlike necessities, tobacco products are based on personal preference, leading to scrutiny over health impacts [3][5] - Philip Morris has successfully shifted nearly 39% of its revenue and almost 40% of its gross profit to smoke-free products, positioning itself better for future growth compared to Altria, which still relies on cigarettes for nearly 90% of its revenue [11][12] Investment Considerations - Altria offers a high dividend yield of 6.9%, appealing to income investors, while Philip Morris has a lower yield of 3.1% but is considered a better long-term investment due to its stronger business performance [10][13][14] - For investors with a long-term perspective, Philip Morris is viewed as the more attractive option due to its better positioning and growth potential [14]

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]

Investment Rating - Industry rating: Outperform the market (maintained) [8] Core Insights - Japan Tobacco's PloomX revenue increased by 44% year-on-year, continuing to expand in global markets [1] - Japan Tobacco's total revenue reached 3.15 trillion yen, a 10.9% increase year-on-year, while operating profit grew by 3.7% to 697.2 billion yen [1] - Altria's NJOY brand saw significant growth, with consumable shipments increasing by 102.61% and device shipments by 284.62% in 2024 [5] - Altria's overall net revenue for 2024 was $24.018 billion, a decrease of 1.9% compared to 2023, but diluted EPS rose by 3.4% to $5.12 [4] Summary by Sections Japan Tobacco - The harm reduction product segment achieved revenue of 98.9 billion yen, a 21.1% increase year-on-year, with sales volume rising by 24.2% [2] - The traditional tobacco segment saw sales of 541.9 billion sticks, a 2% increase, although traditional tobacco sales in Japan declined by 5.3% [3] Altria - NJOY's consumable shipments reached 46.6 million units, with device shipments at 5 million units, both showing substantial year-on-year growth [5] - Altria expects EPS for 2025 to be between $5.22 and $5.37, indicating a year-on-year growth of 2% to 5% [6] - The company plans to repurchase an additional $1 billion in shares in 2025, building on a previously completed $3.4 billion buyback program [6] Investment Recommendations - Key recommendations include focusing on Smoore International and monitoring companies in the vaping supply chain and tobacco supply chain [6]