Categories Analysis, Consumer

Here are a few points to keep in mind if you are considering Altria (MO)

Full-year 2022 adjusted EPS is expected to be $4.79-4.93

Shares of Altria Group Inc. (NYSE: MO) have gained 15% year to date and 12% over the past 12 months. The company reported its first quarter 2022 earnings results last week. There is a mixed sentiment surrounding Altria and here are a few points to keep in mind if you are considering this stock:

Better-than-expected results

In Q1, Altria’s net revenues declined 2.4% year-over-year to $5.9 billion but exceeded expectations. The decrease in the top line was mainly due to the sale of the wine business last October. Reported EPS increased 40.3% to $1.08 while adjusted EPS rose 4.7% to $1.12, beating estimates. The bottom line growth was driven mainly by higher operating companies income.

Smoke-free segment

Altria is seeing healthy performance within its smoke-free portfolio from products such as on! and oral nicotine pouches. Reported shipment volume for on! almost doubled YoY to 18 million cans in Q1. At retail, on!’s share of all tobacco increased by 2.5 percentage points to reach 4.1%.

Altria Group Q1 2022 Earnings Infographic

On its quarterly conference call, Altria said that on!’s share growth was mainly driven by repeat purchases from existing customers and increased tobacco consumer trial. At the category level, oral nicotine pouches reached a total oral tobacco retail share of 19.3 percentage points in Q1.

The category grew 6.1 share points YoY, with 40% of this growth coming from on! The brand is doing well in all regions of the US and it is a highly competitive product in the space. Altria is also working on modified-risk tobacco product applications for on!

In e-vapor, total category volume is estimated to have increased 10% YoY and 4% sequentially due to increased volume in the vape store channel.

Balance sheet and shareholder return

At the end of Q1, Altria had cash and cash equivalents of $5 billion and long-term debt of $25.4 billion. During the quarter, the company paid approx. $1.6 billion in dividends and repurchased approx. 11.3 million shares for $576 million.

Outlook

Altria expects full-year 2022 adjusted EPS to grow 4-7% year-over-year to a range of $4.79-4.93. The company expects adjusted EPS growth to be weighted towards the second half of the year.

Inflation

On its call, Altria discussed the impact of macroeconomic factors on US tobacco consumers. In January, the Omicron variant disrupted the routines and purchasing patterns of consumers leading to short-term decreases in retail trips and overall tobacco volumes. Increased inflation throughout the quarter put pressure on discretionary income levels. The company expects inflation to persist through the remainder of the year.

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Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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