Core Insights - Altria Group, Inc. is at a critical juncture as nicotine pouches capture 55.7% of the U.S. oral tobacco market, marking an 11.1-point year-over-year increase, which is altering market dynamics [1][8] - The company faces challenges in maintaining its market share in the rapidly growing oral segment, with its on! brand holding an 8.7% share of the total U.S. oral tobacco category and a reduced 15.6% share in the nicotine pouch segment, down 4.1 points due to competitive promotional activities [1][8] Market Dynamics - Competitor promotions have led to a 7% decrease in average retail prices for nicotine pouches nationally, with some major retail chains experiencing price drops exceeding 70% [2] - Altria's on! brand saw a retail price increase of approximately 1.5% during the same period, indicating a divergence from the broader category pricing trends [2] - Despite the promotional environment, Altria reported steady retail takeaway for on!, suggesting consistent consumer demand [2] Product Development - To enhance its competitive position, Altria is launching on! PLUS, a next-generation nicotine pouch aimed at improving comfort, nicotine delivery, and flavor satisfaction [3] - The product has been introduced in Florida, Texas, and North Carolina, with early research indicating higher purchase intent compared to several competing brands [3] Competitive Landscape - Philip Morris International Inc. reported a 16.9% increase in global pouch shipments and a 39% growth in U.S. ZYN offtake, supported by extensive commercial activities and investments in capacity [5] - Turning Point Brands, Inc. experienced a remarkable 627.6% year-over-year growth in modern oral segment net sales, reaching $36.7 million, which now constitutes nearly 30.8% of its total revenues [6] Financial Performance - Altria's shares have declined by 9.8% over the past month, contrasting with a 1.8% decline in the industry [7] - The company trades at a forward price-to-earnings ratio of 10.47X, lower than the industry average of 14.12X [10] - Zacks Consensus Estimates project year-over-year earnings growth of 6.1% for 2025 and 2.5% for 2026 [11]

Core Insights - Altria Group, Inc.'s oral tobacco business achieved a significant margin performance in Q3 2025, with adjusted operating company income margins increasing by 2.4 percentage points to 69.2% despite a decline in segment revenues and a 9.6% drop in overall shipment volumes [1][7] - The margin expansion is attributed more to pricing power rather than product mix, as Altria raised prices while maintaining strong pricing discipline, even as competitors in the pouch category reduced prices [1][2][3] Financial Performance - The oral tobacco margin of 69% reflects effective pricing strategies and cost control in a competitive market, indicating that Altria can sustain profitability through disciplined execution [3][7] - Altria's shares have decreased by 12.5% over the past month, contrasting with the industry's decline of 5.7% [6] - The forward price-to-earnings ratio for Altria is 10.33X, lower than the industry average of 13.44X, suggesting potential undervaluation [8] Earnings Estimates - The Zacks Consensus Estimate indicates year-over-year earnings growth of 6.1% for 2025 and 2.5% for 2026 [9] - Current earnings estimates for Q4 2025 and Q1 2026 are projected at $1.30 and $1.24, respectively, with the current year estimate at $5.43 and next year at $5.57 [10]

Financial Data and Key Metrics Changes - Adjusted diluted earnings per share increased by 3.6% in Q3 and by 5.9% for the first nine months [20] - Adjusted operating companies income (OCI) for smokeable products grew by 0.7% to nearly $3 billion in Q3 and by 2.5% to $8.4 billion for the first nine months [20] - Adjusted OCI margins expanded to 64.4% for both Q3 and the first nine months, representing margin growth of 1.3 percentage points and 2.7 percentage points respectively [20] Business Line Data and Key Metrics Changes - Domestic cigarette volumes declined by 8.2% in Q3 and 10.6% for the first nine months when adjusted for trade inventory movements [21] - The oral tobacco products segment saw adjusted OCI decline by less than 1% in Q3, but adjusted OCI increased by 3.3% with margin expansion of 1.8 percentage points to 69% [24][25] - Helix's reported shipment volume for on! increased by nearly 1% in Q3 and approximately 15% for the first nine months [8] Market Data and Key Metrics Changes - The nicotine pouch category grew to 55.7 share points, an increase of 11.1 share points year-over-year [7] - The e-vapor category included approximately 21 million vapers, up nearly 2 million versus a year ago [13] - The discount segment of the industry expanded by 2.4 share points year-over-year, with Basic capturing over half of that growth [23] Company Strategy and Development Direction - The company is focusing on expanding its smoke-free portfolio and exploring international opportunities through a collaboration with KT&G [5][18] - The launch of on! PLUS is seen as a premium product aimed at appealing to both adults who dip and competitive nicotine pouch consumers [10] - The company is committed to returning value to shareholders, as evidenced by a recent dividend increase and an expansion of the share repurchase program [5][27] Management Comments on Operating Environment and Future Outlook - Management noted that consumers are under pressure but are seeing some consistency in gas prices and inflation [33] - The company is optimistic about the regulatory environment, particularly with recent FDA actions that may streamline product authorizations [16] - The company raised the lower end of its 2025 guidance range, expecting adjusted diluted EPS in the range of $5.37-$5.45, representing a growth rate of 3.5%-5% from a base of $5.19 in 2024 [26] Other Important Information - The company returned nearly $6 billion to shareholders in the first nine months, including $5.2 billion in dividends and $712 million in share repurchases [27] - The balance sheet remains strong, with a debt to EBITDA ratio of 2x as of September 30 [28] Q&A Session Summary Question: Insights on fourth quarter earnings growth and smokeable OCI - Management acknowledged the impact of share repurchase and MSA legal fund expiration on earnings growth, while monitoring consumer spending in a dynamic marketplace [31] Question: Drivers behind the moderation in cigarette industry decline - Management indicated that consistency in consumer pressures and stepped-up enforcement in e-vapor are influencing market dynamics [34] Question: Performance and positioning of on! in a competitive environment - Management expressed satisfaction with on!'s performance despite competitive pressures, highlighting steady retail takeaway volume [37] Question: Opportunities from the KT&G partnership - Management outlined three prongs of the partnership: expanding modern oral initiatives, exploring non-nicotine opportunities, and improving operational efficiencies [40] Question: Pricing strategy for on! PLUS - Management confirmed that on! PLUS is positioned as a premium product, with introductory price promotions planned for its launch [48] Question: Impact of FDA pilot program on product launches - Management emphasized the importance of a functioning regulatory system and indicated that decisions will be made in the long-term best interest of the company [57]

Financial Performance - Altria's adjusted diluted EPS increased by 3.6% from $1.40 in Q3 2024 to $1.45 in Q3 2025[8] - For the first nine months of 2025, Altria returned nearly $6 billion to shareholders, including $5.2 billion in dividends and $712 million in share repurchases[98] - Altria increased its quarterly dividend by 3.9% to $1.06 per share[19] - The company expanded its existing share repurchase program from $1 billion to $2 billion[19] - The company is raising the lower-end of its full-year 2025 guidance range and now expects to deliver adjusted diluted EPS in a range of $5.37 to $5.45, representing a growth rate of 3.5% to 5.0% from 2024[95] Oral Tobacco Category - The oral tobacco industry volume increased by 14.5% for the six months ended September 30, 2025[22] - Oral nicotine pouches retail share of the oral tobacco category increased by 11.1 percentage points from Q3 2024 to Q3 2025, reaching 55.7%[22] - on! reported shipment volume increased by 0.7% in Q3 2025, with 42.2 million cans shipped[25] - For the nine months ended September 30, 2025, on! reported shipment volume increased by 14.8% to 133.6 million cans[25] - on!'s share of the oral tobacco category increased by 0.8 percentage points to 8.7% for the nine months ended September 30, 2025[28] Regulatory and Enforcement - Horizon submitted a combined PMTA & MRTPA to the FDA[32] - The FDA launched a pilot program to streamline PMTA reviews for oral nicotine pouches, and applications for on! PLUS are included in the program[47, 49]

Core Insights - Altria Group, Inc. and Philip Morris International Inc. are navigating a transforming tobacco market with distinct strategies, focusing on smoke-free alternatives and maintaining strong brand presence [1][2] Altria Group, Inc. - Altria's pricing power is a key factor in its financial resilience, with a 10% net price realization in smokeable products leading to a 4.2% increase in adjusted operating companies income (OCI) in Q2 2025 [6] - The oral tobacco segment, particularly the on! nicotine pouch brand, saw shipments rise 26.5% year over year, contributing to a 10.9% increase in adjusted OCI [7] - Adjusted earnings per share (EPS) increased 8.3% year over year to $1.44 in Q2 2025, with revenues net of excise taxes at $5.29 billion [8] - Marlboro maintains a 59.5% share in the premium category, showcasing Altria's strong market position and ability to adapt to a smoke-free future [10] Philip Morris International Inc. - Philip Morris's growth is driven by smoke-free products, which accounted for 41% of total net revenues and 42% of gross profit in Q3 2025 [11] - Shipments of IQOS, ZYN, and VEEV showed significant growth, with IQOS shipments up 15.5% to 41 billion units, maintaining a 76% global share in heated tobacco [12] - Adjusted operating income rose 12.4% to $4.7 billion, with adjusted EPS increasing 17.3% to $2.24, supported by strong performance in smoke-free products [13] - Despite a 3.2% decline in cigarette shipment volumes, Philip Morris managed a 4.3% increase in net revenues through pricing strategies [14] Market Performance - Altria's stock has gained 25.3% over the past year, outperforming Philip Morris's 13.1% increase and the broader S&P 500's 20.6% rise [21] - Altria is trading at a forward P/E ratio of 11.41, while Philip Morris's forward P/E ratio stands at 18.24 [20] Investment Outlook - Altria is positioned as a better investment for income-focused investors due to its attractive valuation, robust pricing power, and growing smoke-free momentum, while Philip Morris offers stronger global growth potential [22]

Industry Overview - The Zacks Tobacco industry is facing significant challenges, including declining cigarette sales due to shifting consumer preferences, inflationary pressures, and tightening regulations [1][4] - Rising health awareness and stricter restrictions on smoking are reducing demand for traditional tobacco products, negatively impacting overall industry performance [1][4] Key Trends - **Challenges in Cigarette Sales Volumes**: The industry is experiencing a decline in cigarette sales driven by inflation and changing consumer spending patterns, alongside regulatory restrictions on sales and advertising [4] - **Escalated Costs**: Industry participants are affected by cost inflation related to essential materials, energy, and labor, which poses risks to profit margins [5] - **Rising Popularity of Smoke-Free Options**: There is a growing demand for smoke-free alternatives like heated tobacco and vapor products, driven by health awareness and regulatory changes [6] Industry Performance - The Zacks Tobacco industry currently ranks 165, placing it in the bottom 32% of over 243 Zacks industries, indicating dull near-term prospects [7][8] - The industry's consensus estimate for current financial year earnings has decreased by 1.2% since August 2025, reflecting a negative earnings outlook [9] Market Comparison - Over the past year, the Zacks Tobacco industry has outperformed the S&P 500, gaining 36.4% compared to the S&P 500's growth of 18.4% [11] Valuation Metrics - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 14.44X, lower than the S&P 500's 23.53X and the sector's 16.37X [14] Company Highlights - **Philip Morris International**: This company is transitioning towards a smoke-free future, focusing on reduced-risk products (RRPs) and has seen a 30% increase in shares over the past year [17][19] - **Altria Group**: Altria is prioritizing RRPs and has experienced a 31.7% surge in shares over the past year, supported by its strong legacy brands [22][23] - **Turning Point Brands**: This company has gained momentum with a 105.8% increase in shares over the past year, focusing on innovative product launches and expanding distribution channels [26][28]

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]