01—Abstract
Summary
Summary of the 10-Q filed October 26, 2023. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 billionb 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.
02—Key points
Key Highlights
- Net 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.
- Net 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.
- Adjusted net earnings, excluding special items, increased by a more modest 1.7% to $6.74 billion, reflecting underlying operational performance.
- The company completed the acquisition of NJOY for approximately $2.9 billion, a strategic move to strengthen its smoke-free portfolio.
- Altria increased its quarterly dividend by 4.3% to $0.98 per share, with an annualized rate of $3.92.
- The company repurchased $732 million of its common stock during the first nine months of 2023.
- Operating 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2023, Altria Group, Inc. kept $0.34.
- Revenue$6.28B100.0%
- Cost of revenue−$2.58B41.1%
- Gross profit$3.70B58.9%
- Operating costs−$610.0M9.7%
- Operating income$3.09B49.2%
- Interest, other & tax−$923.0M14.7%
- Net income$2.17B34.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2023filed October 26, 2023Financial Statements
Q3 FY2023 against Q3 FY2022
| Line item | Q3 FY2023Q3 FY2022 | Change |
|---|---|---|
| Revenue | $6.28B$6.55B | −4.1% |
| Cost of Revenue | $1.58B$1.72B | −8.0% |
| Gross Profit | $3.70B$3.70B | +0.1% |
| Operating Income | $3.09B$3.11B | −0.7% |
| Net Income | $2.17B$224.00M | +867.0% |
| EPS (Basic) | $1.22$0.12 | +916.7% |
| EPS (Diluted) | $1.22$0.12 | +916.7% |
| Shares Outstanding (Basic) | 1.77B1.80B | −1.4% |
| Shares Outstanding (Diluted) | 1.77B1.80B | −1.4% |
05—Questions
Frequently Asked Questions
What was Altria's financial performance in the first nine months of 2023?
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.
What are the key strategic initiatives Altria is pursuing?
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.
How is Altria returning capital to shareholders?
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.
What are the main challenges facing Altria?
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.
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