Altria Group Inc Earnings - Q1 2025 Analysis
Positives
- The company is encouraged by Marlboro's resilient performance and believes it is a testament to its positioning as the aspirational brand in the category, strong brand loyalty, and PM USA's RGM and data analytics capabilities.
- The company is pleased with the test that it was able to capture those consumers that couldn't move up or unable to move up with the increased price and was able to capture them with the brand.
- The company expects to deliver 2025 full-year adjusted diluted EPS in a range of $5.30 to $5.45, representing a growth rate of 2% to 5% from a base of $5.19 in 2024.
- The company grew by nearly five times versus the prior year exceeding $200 million in Q1.
- The company is pleased with the way Marlboro is performing in the marketplace with the consumer under extreme economic conditions that they're facing.
Q&A Highlights - Q1 2025
Analyst asked about the current state of the consumer and the impact of inflationary pressure on cross-category movement.
The company is seeing the consumer under pressure, with the cumulative impact of inflation being a factor. They are also seeing pricing move up in the cross-category, especially in illicit e-vapor, as consumers seek more affordable options.
Analyst asked about the company's confidence in the consumer for recent price increases and the flexibility to reinvest more in Marlboro.
The company has the flexibility to apply resources where they're needed, using data analytics and revenue growth management tools, and they're pleased with the results Marlboro has had in the marketplace.
Analyst asked about the potential risks to on!'s trajectory as the company enters the second half of the year, and whether it needs to pursue a multi-brand strategy or enter the synthetic nicotine market.
William F. Gifford, the company's CEO, responded that the company is pleased with the performance of on! and that it has a competitive marketplace. He also mentioned that the company is excited about the authorization of on! PLUS and its potential to bring in new adult dippers. However, he acknowledged that the base growth of on! will slow down as a percentage, but the company will continue to drive its momentum in the marketplace.
Analyst asked about the company's approach to the e-cigarette market, specifically whether it will exit the market or if it has a viable long-term strategy.
William F. Gifford explained that the company cannot ship anything after March 31, but anything that was at wholesale or retail can continue to be sold through. He also emphasized the need for authorizations and enforcement for illicit e-vapor products that go around the regulatory process. The company is investing in its pipeline to learn from the consumer's traits and characteristics and enhance its products. He also mentioned that the company is close to having worked around all of the four patents that it was found to have infringed upon and is excited to bring pods back to the marketplace.
Analyst asked about why Altria Group Inc. is no longer providing the price gap metric in their quarterly metrics.
The company explained that the price gap metric was a national average, but they are executing and making decisions at the store level, where the price gap matters. They felt that publishing the national price gap was causing confusion and not reflecting how they were managing the business, so they decided to remove it from the quarterly metrics.
Analyst asked about Altria's view on synthetic vape products and whether they could increase activity without having to go around the PMTA filings.
Altria's view on synthetic has evolved over time, and they are now looking at all available opportunities to assess what's the right move in that direction. They are aware of the FDA's enforcement discretion and enforcement against synthetic nicotine products and are considering their options.
Analyst asked about the drivers behind the decrease in settlement payments in the quarter, and any phasing that may be behind the payments this year.
Salvatore Mancuso explained that the expiration of the legal fund was a factor in the decrease, and that this benefit will continue in the first three quarters of 2023.
Analyst asked about how Altria Group Inc. plans for the long term and in their guidance, specifically regarding tariffs.
Salvatore Mancuso stated that the company is not going to provide specific numbers or details regarding tariffs, but they have a terrific supply chain group that is looking at alternative suppliers and they feel good about their ability to manage the situation. They will continue to monitor the situation and pay close attention to the impact on the consumer.
Analyst asked about positive signals from the Trump administration and the interpretation of changes in FDA and CTP.
William F. Gifford expressed hope that the Trump administration will take a position of authorizing and enforcing regulations, including increased enforcement at the borders. Additionally, he highlighted the need for the FDA and CTP to follow the regulatory act passed by Congress, with a focus on authorizing products that consumers want and enforcing against those that do not comply with the regulatory process. He mentioned the removal of the proposed rule for menthol in cigarettes and flavored cigars as a positive sign, and expressed hope that this momentum will continue.