The Zacks Tobacco industry is facing mounting challenges, including declining cigarette sales – resulting from shifting consumer preferences, inflationary pressures and tightening regulations. Rising health awareness and stricter restrictions on smoking are reducing demand for traditional tobacco products, weighing on the overall industry performance.Despite these headwinds, companies such as Philip Morris International Inc. ((PM), Altria Group, Inc. ((MO) and Turning Point Brands, Inc. ((TPB) are well-posi ...

Core Insights - KT&G announced growth targets and shareholder return plans during the "2025 KT&G CEO Investor Day" [1][2] - A comprehensive MOU was signed with Altria for strategic collaboration in nicotine and non-nicotine sectors [2][8] Shareholder Return Strategy - KT&G aims for a total payout ratio of 100% or higher and a dividend payout ratio of 50% or higher [3] - The minimum annual dividend per share is set at 6,000 KRW, an increase of 600 KRW from the previous year [4] - Additional share repurchase and cancellation of 260 billion KRW is planned, marking a year-on-year increase of 100 billion KRW [4] Financial Performance - The global cigarette business has achieved five consecutive quarters of "triple growth" in revenue, operating profit, and sales volume [6] - Adjusted operating profit for the first half of 2025 showed a year-on-year growth of 127.8% [6] Strategic Initiatives - KT&G targets double-digit growth for both operating profit and revenue in 2025 [8] - The MOU with Altria includes plans for joint acquisition of a Scandinavian nicotine pouch manufacturer to enter the growing nicotine pouch market [10] - Collaboration will also focus on optimizing the traditional cigarette business and expanding into the U.S. health functional foods market [12][13]

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 a major player in the U.S. tobacco and nicotine products market, with a focus on maintaining strong core businesses while pursuing growth opportunities [1] Financial Performance - Altria is set to report its Q3 2025 earnings on October 30, with analysts expecting an EPS of $1.44, an increase from $1.38 in the same quarter last year. Quarterly revenue is projected to be $5.31 billion, down from $5.54 billion year-over-year [2] - In Q2 2025, Altria reported adjusted EPS of $1.44, exceeding the consensus estimate of $1.39, and revenues of $6.10 billion, surpassing the consensus of $5.21 billion [3] Strategic Outlook - The CEO highlighted the strong performance of the oral tobacco segment, particularly the on! product, which was a key growth driver. The company returned over $4 billion to shareholders through dividends and share repurchases in the first half of the year [4] - Altria has raised the lower end of its full-year 2025 guidance, now expecting adjusted diluted EPS in the range of $5.35 to $5.45, reflecting a growth rate of 3.0% to 5.0% from a base of $5.19 in 2024 [4] Dividend Information - Altria's current dividend yield stands at 6.41%, with a total of $4.24 per share paid in dividends over the last 12 months [2] - To generate an income of $100 per month from Altria's dividends, an investment of approximately $18,721 is required, based on the current dividend yield [6]

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]

Core Insights - Philip Morris International Inc. (PM) is experiencing significant growth in smoke-free products, which are becoming a crucial part of its long-term transformation strategy, potentially offsetting declines in traditional cigarette sales [1][3][4] Smoke-Free Product Performance - Smoke-free products, including IQOS, ZYN, and VEEV, saw a shipment volume increase of 11.8%, resulting in a 15.2% rise in net revenues and a 23.3% increase in gross profit year over year [1][8] - Smoke-free products now account for 41% of total revenues and 42% of gross profit, indicating a strong shift in the company's revenue structure [1][3] - Management anticipates smoke-free volumes to grow by 12-14% for the full year, while cigarette volumes are expected to decline by approximately 2% [2] Cigarette Sales Overview - Cigarette shipments decreased by 1.5% to 155.2 billion units, primarily due to weaknesses in markets like Turkey and Indonesia [2][8] - Despite the decline in shipment volumes, combustibles still generated $6 billion in quarterly revenues, reflecting a 2.1% year-over-year increase [2][8] Competitive Landscape - Altria Group, Inc. (MO) is focusing on its on! nicotine pouch brand, which saw a 26.5% increase in shipments to 52.1 million cans, capturing an 8.7% retail share in the U.S. oral tobacco market [5] - Turning Point Brands, Inc. (TPB) reported a nearly eightfold increase in Modern Oral sales to $30.1 million, raising its revenue target for 2025 to $100-$110 million [6] Financial Metrics - Philip Morris shares have increased by 6.1% over the past month, compared to an industry growth of 11.3% [7] - The company is trading at a forward price-to-earnings ratio of 20.7X, higher than the industry average of 15.69X [9] - The Zacks Consensus Estimate projects year-over-year earnings growth of 14.2% for 2025 and 11.9% for 2026 [10]

Core Insights - Altria Group's on! brand experienced significant growth in Q2 2025, with shipments increasing by 26.5% year over year and capturing an 8.7% market share in the oral tobacco segment, up 0.7 percentage points from the previous year [1][8] - The oral tobacco segment's adjusted operating income rose by 10.9%, despite challenges in the moist smokeless tobacco (MST) category, which saw declines in retail share for key brands [1][2] Oral Tobacco Segment Performance - The moist smokeless tobacco category faced headwinds, with Copenhagen and Skoal experiencing retail share declines of 3.5 and 1.6 percentage points, respectively, leading to an overall decline of 4.6 percentage points in the segment's total retail share to 33.1% [2] - Volumes for Copenhagen and Skoal fell by 7.7% and 8.8%, respectively, indicating a significant downturn in traditional smokeless products [2] Nicotine Pouch Market Dynamics - The nicotine pouch category now constitutes over half of the U.S. oral tobacco market, providing a favorable environment for on!'s growth, although competition is intensifying [3] - on!'s share of the pouch segment decreased by 2.3 percentage points to 16.7%, highlighting the challenges in maintaining market share [3][4] Competitive Landscape - Philip Morris International's ZYN brand saw U.S. offtake growth of 26% in Q2 2025, with global volumes increasing by 43% due to expansion into 44 markets, supporting a multi-category smoke-free strategy [5] - Turning Point Brands reported a nearly eightfold increase in Modern Oral sales to $30.1 million, aiming for a double-digit U.S. market share by the end of the decade [6] Financial Performance and Valuation - Altria's shares increased by 10.5% over the past month, outperforming the industry growth of 1.3% [7] - The company trades at a forward price-to-earnings ratio of 11.7X, lower than the industry's average of 15.36X [10] - The Zacks Consensus Estimate for Altria's earnings per share for 2025 and 2026 has risen by 3 cents and 2 cents, respectively, to $5.39 and $5.55 [11]

Core Insights - Altria Group, Inc. is experiencing significant growth in its smoke-free product segment, particularly with its oral nicotine pouch brand, on!, which saw a 26.5% increase in shipments year over year, reaching 52.1 million cans, and capturing an 8.7% share of the total oral tobacco category [1][7] - The nicotine pouch segment now constitutes over half of the oral tobacco category, indicating a shift in consumer preferences away from traditional moist smokeless tobacco [1] - Altria's oral tobacco segment reported a 10.9% increase in adjusted operating income, with margins expanding to 68.7%, despite a 10.2% decline in domestic cigarette shipments [2][3][7] Market Competition - Philip Morris International is aggressively expanding its smoke-free portfolio, with a 17.3% organic growth in smoke-free net revenues, driven by a 26% increase in ZYN U.S. offtake and a 65% rise in international pouch volumes [4] - Turning Point Brands is also making strides in the modern oral nicotine market, with white pouch sales growing nearly 10 times year over year, prompting an increase in full-year guidance to $80-$95 million [5] Stock Performance and Valuation - Altria's shares have increased by 3.8% over the past month, contrasting with a 1.6% decline in the industry [6] - The company is currently trading at a forward price-to-earnings ratio of 11.4X, which is lower than the industry's average of 14.9X [9] - The Zacks Consensus Estimate for Altria's earnings per share for 2025 and 2026 has risen by 2 cents each, now projected at $5.39 and $5.55 respectively [10]

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]

Core Insights - Philip Morris International's smoke-free business is expanding significantly, with IQOS and ZYN being pivotal to this growth. In Q2 2025, smoke-free business contributed 41% of total net revenues and over 42% of total gross profit, indicating a strong shift from combustible products [1][8]. Smoke-Free Business Performance - Smoke-free business net revenues increased by 15.2% year-over-year (14.5% organically), while gross profit rose by 23.3% (21.5% organically), outpacing the growth of combustible products [1]. - IQOS, the heat-not-burn device, experienced an 11.4% increase in global sales in Q2, with a market share of 31.7% in Japan and a rise of 1.2 points to 10.9% in Europe [2][8]. - ZYN, the leading nicotine pouch, saw a 36% growth in June and 26% in Q2 in the U.S., with global shipments increasing by 43% year-over-year, driven by strong U.S. demand and international expansion [3][8]. Competitive Landscape - Altria Group's on! nicotine pouch brand reported a 26.5% increase in shipments to 52.1 million cans in Q2 2025, capturing an 8.7% retail share of the U.S. oral tobacco market [5]. - Turning Point Brands' modern oral nicotine pouch sales surged nearly tenfold year-over-year, generating $22.3 million in revenues, with a revised full-year sales guidance of $80–$95 million [6]. Valuation and Earnings Estimates - Philip Morris shares have declined by 8.6% in the past month, compared to a 1.7% decline in the industry [7]. - The company trades at a forward price-to-earnings ratio of 20.26X, higher than the industry's average of 14.56X [10]. - Zacks Consensus Estimates indicate year-over-year earnings growth of 14% for 2025 and 12% for 2026 [11].