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Altria Group Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company grew its share of the oral tobacco category by 2 share points YoY to 8.9% in Q4.
- The company paid $6.8 billion in dividends and raised its dividend by 4.1% in August, marking its 59th increase in the last 55 years.
- The company grew adjusted diluted EPS by 3.4% and continued its long history of rewarding shareholders with over $10.2 billion in dividends and share repurchases.
- The company grew NJOY device shipment volume by more than 22% to 1.1 million units in Q4 and was 5 million units for the full year.
- Oral tobacco products segment retail share declined by 3.1 percentage points in Q4 due to declines in MST brands.
- The smokeable category is a declining category.
- The illicit e-vapor market is flooding the market with flavors.
- Illicit product manufacturers, distributors, and retailers have yet to experience any material consequences for violating federal laws and regulations.
- The cigarette category is expected to decline by 2.5% due to the decline in adult smokers, excluding any cross-category movement.
- The company will continue to watch the economy and the impact of cumulative inflation. If it continues to compound, the company would expect its consumer to stay under pressure.
- The company believes the external environment will remain dynamic in 2025.
- The company will continue to monitor the economy, including the cumulative impact of inflation, tobacco consumer dynamics, illicit product enforcement, and regulatory litigation and legislative developments.
- The company expects the total debt-to-EBITDA ratio to be approximately 2 times.
- The company expects to see continued growth in nicotine pouches, as consumers shift from other forms of nicotine such as cigarettes.
Q&A Highlights from Altria Group Inc Earnings Call Q4 2024
- Analyst asked about the shape of the year, specifically the timing of lower MSA costs and the impact of one less shipping day in the first quarter.
- Management stated that there is no distortion in 2024 compared to 2023, and the company does not guide to the quarter. They also highlighted the one less shipping day in the first quarter.
- Management stated that there is no distortion in 2024 compared to 2023, and the company does not guide to the quarter. They also highlighted the one less shipping day in the first quarter.
- Analyst asked about the continued discretionary income pressure on adult tobacco consumers and the trends they are seeing in those consumers.
- Management stated that they see the cumulative impact of inflation affecting their consumers, both inside and outside of the tobacco industry. They mentioned credit card late payments and the amount of credit card debt that consumers are carrying as examples. The company believes that the pressure is the result of the cumulative impact of inflation and will continue to monitor the situation. They also stated that they see continued pressure in cross-category and highlighted the illicit e-vapor market flooding the market with flavors.
- Management stated that they see the cumulative impact of inflation affecting their consumers, both inside and outside of the tobacco industry. They mentioned credit card late payments and the amount of credit card debt that consumers are carrying as examples. The company believes that the pressure is the result of the cumulative impact of inflation and will continue to monitor the situation. They also stated that they see continued pressure in cross-category and highlighted the illicit e-vapor market flooding the market with flavors.
- Analyst asked about the possible options for NJOY and the potential settlement with JUUL.
- The company has a number of pathways to consider, including a review by the Trade Representative, but public health should be a determining factor. They will be disciplined in their approach and consider a reasonable party on the other side. The e-vapor market is declining, and illegal disposable products are winning. The company is considering pipeline products to meet consumer demands in the e-vapor space.
- The company has a number of pathways to consider, including a review by the Trade Representative, but public health should be a determining factor. They will be disciplined in their approach and consider a reasonable party on the other side. The e-vapor market is declining, and illegal disposable products are winning. The company is considering pipeline products to meet consumer demands in the e-vapor space.
- Analyst asked about the likelihood of the company hitting the high end of its EPS guidance range, given that NJOY is still operating at a loss and has been a drag on earnings.
- The company runs a number of scenarios as they think about 2025, and there are always puts and takes across the plan. They provided a range related to the EPS guidance, and they feel good about the guidance they've provided. They have a lot of levers to pull to deal with anticipated variability in the marketplace.
- The company runs a number of scenarios as they think about 2025, and there are always puts and takes across the plan. They provided a range related to the EPS guidance, and they feel good about the guidance they've provided. They have a lot of levers to pull to deal with anticipated variability in the marketplace.
- Analyst asked about the company's ability to continue to increase pricing while maintaining volume growth, given the competitive landscape and the FDA's enforcement discretion.
- Management acknowledged the competitive landscape and the FDA's enforcement discretion, but stated that the company has been able to generate trial while increasing profitability through data analytics and promotional spending. They also noted that the loyalty percentage of consumers returning to purchase on! has been impressive.
- Management acknowledged the competitive landscape and the FDA's enforcement discretion, but stated that the company has been able to generate trial while increasing profitability through data analytics and promotional spending. They also noted that the loyalty percentage of consumers returning to purchase on! has been impressive.
- Analyst asked about the company's thoughts on the change in administration and what possible scenarios they are considering or preparing for.
- Management stated that they would like to see an agency that is expedient and diligent in authorizing products and enforcing against illicit products in the marketplace. They believe that this would set the US up for harm reduction through time.
- Management stated that they would like to see an agency that is expedient and diligent in authorizing products and enforcing against illicit products in the marketplace. They believe that this would set the US up for harm reduction through time.
- Analyst asked about the risk of the administration scrapping the PMTA process if the FDA can't meet its deadline, and if that would affect pending applications.
- The company prefers the FDA to have authority over nicotine products in the marketplace, as it would ensure manufacturing standards and assigned standards for legitimate products. They would like to see the FDA function as intended, and not become a Wild Wild West marketplace without enforcement.
- The company prefers the FDA to have authority over nicotine products in the marketplace, as it would ensure manufacturing standards and assigned standards for legitimate products. They would like to see the FDA function as intended, and not become a Wild Wild West marketplace without enforcement.
- Analyst asked about the impact of tariffs on Altria's vaping business, specifically if it would be affected by tariffs on China.
- The company has heard comments about everything being sourced from China, but they have not seen any tariffs pass. They have limited impact on any tariffs that are put in place on China.
- The company has heard comments about everything being sourced from China, but they have not seen any tariffs pass. They have limited impact on any tariffs that are put in place on China.