Altria Group, Inc. Q3 2024 Earnings Call Summary

In a recent earnings call, Altria Group, Inc. (NYSE: MO) announced strong financial results for the third quarter of 2024, with CEO Billy Gifford and CFO Sal Mancuso detailing a 7.8% increase in adjusted diluted earnings per share (EPS) for Q3 and a 1.6% rise year-to-date. The company reaffirmed its full-year adjusted EPS guidance, projecting a growth rate of 2.5% to 4% from the previous year.

Financial Highlights

• Adjusted diluted EPS for Q3 increased by 7.8%, with a year-to-date rise of 1.6%.
• Full-year adjusted EPS guidance for 2024 is set at $5.07 to $5.15, indicating a 2.5% to 4% growth from 2023.
• Smokable products segment's adjusted operating income grew by 7.1% in Q3, despite an 8.6% decrease in domestic cigarette volumes.
• Oral tobacco products, particularly NJOY and on!, saw significant growth.
• Altria plans a modernization initiative to save $600 million over five years, with initial costs projected between $100 million and $125 million.
• Challenges from the illicit market and regulatory environment were acknowledged.

Company Outlook

• The company maintains strong guidance for the full year of 2024, with an expected growth rate of 2.5% to 4% in adjusted EPS.
• Altria's modernization initiative is expected to enhance operational efficiency and process improvement, yielding substantial cost savings over the next five years.

Challenges and Opportunities

Bearish Highlights

• The company faces challenges from the illicit tobacco market, particularly in e-vapor products.
• A sequential deceleration in EPS growth is anticipated for Q4 due to the unwinding of overshipments from Q3.
• The price gap between Marlboro and the lowest competitive brand has widened, potentially impacting market dynamics.

Bullish Highlights

• Marlboro continues to hold a strong premium market share at 59.3%.
• Altria's investment in ABI yielded $144 million in earnings.
• The company reached an IRS agreement on tax treatment related to JUUL losses, claiming $4 billion in ordinary losses.

Misses

• Despite the overall positive financial results, the company reported an 8.6% decline in domestic cigarette volumes.

Q&A Highlights

• Management is actively working to avoid issues with a patent under review concerning JUUL's patent infringement case against NJOY.
• Altria has filed PMTA exemptions for minor exterior changes to their products and is prepared to restart the SE process for significant changes.
• The joint venture with Japan Tobacco for the Ploom device remains unaffected by JT's recent U.S. acquisition.
• The company expressed skepticism about the necessity of a proposed rule requiring PMTA tracking numbers for vaping imports and is seeking FDA clarity.

Altria Group, Inc. is navigating a complex regulatory landscape while focusing on transitioning adult smokers to smoke-free products and reducing underage tobacco use. The company's strategic initiatives aim to sustain growth and shareholder value amidst industry challenges.

InvestingPro Insights

Altria Group's recent financial performance and strategic initiatives are highlighted by its impressive gross margin of 69.56% for the last twelve months, emphasizing its ability to manage market challenges effectively. The company’s dividend yield of 8.08%, maintained for 54 consecutive years, demonstrates reliability as an income stock despite industry headwinds. With a P/E ratio of 10.68, the stock appears to present potential upside for investors.

Full transcript – Altria Group (MO) Q3 2024

Operator

Good day everyone and welcome to the Altria Group 2024 Third Quarter Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Altria's management and a Q&A session. Representatives of the investment community and media will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mac Livingston, Vice President of Investor Relations for Altria Client Services.

Questions and Answers

Management addresses various inquiries from analysts regarding expectations and strategies for the future amid the changing market landscape.

Conclusion

Altria Group is uniquely positioned to responsibly lead the transition of adult smokers to a smoke-free future with a clear focus on tobacco harm reduction.

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