Shares of Altria Group were rising after the maker of Marlboro cigarettes topped quarterly sales estimates and said it would be buying back $1 billion of stock.
Altria posted fourth-quarter adjusted earnings of $1.18 a share, in line with Wall Street’s call and flat from the year-ago quarter, according to FactSet.
Sales of $5.98 billon beat estimates of $5.1 billion.
“Our plans for 2024 include a continuation of our strategy to balance earnings growth and shareholder returns with strategic investments toward our Vision,” said CEO Billy Gifford in a statement. “We expect to deliver 2024 full-year adjusted diluted EPS in a range of $5.00 to $5.15, representing a growth rate of 1% to 4% from a $4.95 base in 2023.” Analysts were expecting earnings of $5.07.
The company’s board also authorized a new $1 billion share repurchase program, which it expects to complete by the end of the year.
Altria stock was up 1.3% to $40.62 in premarket trading Thursday. Over the last 12 months, shares have fallen 15%.
This is breaking news. Read a preview of Altria’s earnings below and check back for more analysis soon.
Tobacco giant Altria Group is set to report fourth-quarter earnings on Thursday. There are many fronts to watch: High inflation has weighed on consumer demand, while illicit e-cigarettes are inflicting damage on its sales.
The Marlboro seller is expected to post $5.1 billion in net revenue, roughly the same as 2022’s number, according to analysts polled by FactSet. Net income is expected at $2.1 million, 2% down from a year earlier. That means $1.18 earnings per share.
That’s a brighter outlook than the third quarter. Prices of Altria’s cigarette products increased 8.7% from the year-ago period, but sales volumes fell by 11.6%. As a result, net revenue of the firm’s smokable segment came in 5.3% lower than a year ago.
The lackluster number underscores the pressure cigarette companies face as many of their users either stop smoking or switch to alternative products like heated tobacco, e-vapor, and oral nicotine pouches.
In December, British American Tobacco, which makes Lucky Strike and Dunhill, announced a massive $32 billion write-down of its cigarette brands. The move triggered a sharp selloff not only in BAT stock, but also its American peers like Altria and Philip Morris.
Altria’s oral tobacco products also experienced a 3.3% year-over-year volume drop, but higher prices have more than offset the loss, contributing to a 2.3% growth in the segment’s net revenue.
The deeper-than-usual volume decline was partially due to inflation and consumers’ tighter disposable income, but illegal disposable e-cigarettes have been hurting the firm’s customer base as well, said CFO Sal Mancuso on a call with analysts.
In October, Altria’s e-cigarette subsidiary NJOY sought injunction against a number of e-vapor manufacturers, alleging that some of their products violated state and local bans on flavored e-cigarettes and hence led to unfair competition.
Tobacco companies have been transitioning from traditional combustible cigarettes to smokeless products, but Altria has taken a particularly lengthy and painful path.
In 2018, Altria acquired a 35% share in e-vaping company JUUL Labs with a $12.8 billion investment. But Juul has since gotten entangled in lawsuits regarding its role in youth vaping, as the firm was accused of aggressively marketing to teens.
By the end of 2022, the estimated value of Altria’s JUUL investment dwindled to just $250 million, according to the firm. Last March, Altria announced that it had exchanged its stake in Juul for a nonexclusive global license to some of the startup’s heated-tobacco intellectual property.
Three months later, Altria bought NJOY, one of the few e-cigarette makers with clearance from federal regulators, to develop its own products.
Despite subdued share prices, Altria has been boosting shareholder gains through generous share buybacks and dividend payments.
Through the first nine months of 2023, the tobacco giant returned $732 million cash to shareholders through the repurchase of 16.3 million shares at an average price of $44.97. It expected to complete another $268 million worth of share repurchase by the end of 2023.
Altria also remains a solid dividend payer. The firm raised its dividend by 4.3% in August, the 58th increase in the past 54 years. Management said it plans to maintain its dividend goal, which targets mid-single digits growth annually.
For the full year of 2023, management expects adjusted EPS to be in a range of $4.91 to $4.98, representing a growth rate of 1.5% to 3% from 2022.
The lack of growth has kept Altria shares range-bound over the past 18 months. But Wall Street analysts still see upside in the stock, with an average target price of $47. That’s nearly 18% above the current level of $40.
In a recent research note, Goldman Sachs analysts said they expect Altria to more than offset the volume decline with robust price increases in the fourth quarter. Still, they noted that the stock will likely remain range-bound until volume decline moderates.
