10-QPeriod: Q3 FY2023

ALTRIA GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2023

Filed October 26, 2023For Securities:MO

Summary

Altria Group, Inc. reported mixed results for the nine months ended September 29, 2023. Net revenues decreased by 2.5% year-over-year to $18.5 billion, primarily due to lower sales in the smokeable products segment, though this was partially offset by higher pricing across segments and growth in oral tobacco products. Net earnings saw a significant increase of 97.5% to $6.07 billion, largely driven by a favorable comparison to the prior year which included a substantial impairment charge related to its ABI investment and a loss on the disposition of JUUL equity securities. The company also repurchased shares and increased its quarterly dividend, underscoring its commitment to returning capital to shareholders. The acquisition of NJOY for approximately $2.9 billion is a key strategic move to expand Altria's presence in the smoke-free product category. While reported earnings improved substantially, a significant portion of this was due to one-time items and year-over-year comparables. Adjusted net earnings, which exclude special items, saw a more modest increase of 1.7% to $6.74 billion, indicating more stable underlying operational performance. The company faces ongoing challenges from macroeconomic pressures, regulatory scrutiny, and evolving consumer preferences, particularly the continued growth of illicit e-vapor products which impact cigarette volumes. Altria continues to navigate these complexities while investing in its smoke-free future and maintaining its strong dividend payout.

Financial Highlights

50 data points
Beta

Revenue

$6.28B

58.9% Gross Margin

Net Income

$2.17B

34.5% Net Margin

EPS (Diluted)

$1.22

Total Assets

$36.47B

Cash & Equivalents

$1.58B

Free Cash Flow

$2.91B

Financial Statements
Beta
Revenue$6.28B
Cost of Revenue$1.58B
Gross Profit$3.70B
Operating Income$3.09B
Net Income$2.17B
EPS (Basic)$1.22
EPS (Diluted)$1.22
Shares Outstanding (Basic)1.77B
Shares Outstanding (Diluted)1.77B

Key Highlights

  • 1Net revenues decreased by 2.5% to $18.5 billion for the first nine months of 2023, mainly due to lower sales in the smokeable products segment.
  • 2Net earnings increased significantly by 97.5% to $6.07 billion for the first nine months of 2023, largely due to favorable year-over-year comparisons, including a significant impairment charge in the prior year.
  • 3Adjusted net earnings, excluding special items, increased by a more modest 1.7% to $6.74 billion, reflecting underlying operational performance.
  • 4The company completed the acquisition of NJOY for approximately $2.9 billion, a strategic move to strengthen its smoke-free portfolio.
  • 5Altria increased its quarterly dividend by 4.3% to $0.98 per share, with an annualized rate of $3.92.
  • 6The company repurchased $732 million of its common stock during the first nine months of 2023.
  • 7Operating income decreased by 3.8% to $8.75 billion for the first nine months of 2023, impacted by higher general corporate expenses and amortization related to the NJOY acquisition.

Frequently Asked Questions

For the first nine months of 2023, Altria reported a 2.5% decrease in net revenues to $18.5 billion, primarily driven by lower sales in its smokeable products segment. However, net earnings saw a substantial increase of 97.5% to $6.07 billion. This significant earnings growth was largely due to favorable year-over-year comparisons, including the absence of a large impairment charge on its investment in ABI that impacted the prior year's results, and a loss on the disposition of its JUUL equity securities in the current year. Adjusted net earnings, which exclude special items, grew by a more modest 1.7% to $6.74 billion.

Altria's primary strategic initiative is 'Moving Beyond Smoking,' which aims to transition adult smokers to smoke-free products. A significant part of this strategy is the acquisition of NJOY for approximately $2.9 billion, which strengthens its e-vapor product portfolio. The company is also focusing on growing its U.S. smoke-free volumes, achieving specific revenue targets for smoke-free products, and developing a strategy for international markets in smoke-free and non-nicotine categories.

Altria continues to prioritize returning capital to shareholders. In August 2023, the company increased its quarterly dividend by 4.3% to $0.98 per share, marking a new progressive dividend goal targeting mid-single digit annual growth. Additionally, Altria repurchased approximately $732 million of its common stock during the first nine months of 2023, indicating continued confidence in its valuation and commitment to share buybacks.

Altria faces several challenges, including ongoing macroeconomic pressures like inflation impacting consumer disposable income, which affects purchasing behavior and can lead to shifts towards discount products. Regulatory scrutiny from the FDA and potential legislative changes regarding product standards (e.g., nicotine levels, flavors) remain significant factors. Furthermore, the company contends with the growth of illicit flavored e-vapor products, which are contributing to higher cigarette industry volume declines, and intense competition across all tobacco categories.