Altria’s gains from smoke-free products in focus during Q3 earnings

Altria (NYSE:MO) is set to report third quarter earnings on Thursday, with investors keeping an eye on the tobacco giant’s gains from its portfolio of smoke-free products.

Wall Street expects the Marlboro cigarette maker to post quarterly EPS of $1.35, indicating a 5.5% increase, while revenue is expected to rise nearly 1% to $5.33B.

The Virginia-based company faced headwinds as cigarette industry shipment volumes remained pressured during the second quarter and first half, amid the growth of illegal disposable e-vapor products and limited discretionary spending from consumers in a tough economy.

Stifel analyst Matthew Smith estimates a 10% decline in cigarette volumes with shipments during the quarter, while Citi trimmed its Q3/FY24E U.S. combustible shipment volume estimate to -9.5% and -10.3% respectively from a previous figure of -8.0% and -9.8%.

Even though Altria’s primary revenues remain tied to its Smokeable Products segment, the company has been expanding its smoke-free business to keep up with the rising demand for alternatives to conventional tobacco products.

During its second quarter earnings call, Altria informed about its strategy to maximize profitability over the long term while balancing investments in Marlboro and funding the growth of smoke-free products.

Smith said robust cigarette pricing is expected to offset the impact of the elevated volume decline and the source of investment to support Altria’s expansion of smoke-free products.

Investors will also keep an eye on expenses, given the investment required to bolster the smoke-free product line.

Wall Street and Seeking Alpha’s Quant Ratings recommended the company as a Hold, while Seeking Alpha analysts are bullish on the stock and rated it a Buy.

Over the last two years, MO has beaten EPS estimates 50% of the time and has beaten revenue estimates 13% of the time.

Over the last three months, EPS estimates have seen five upward revisions and two downward. Revenue estimates have seen four upward revisions versus three downward moves.