Altria Group, Inc. (NYSE: MO) faced a notable drop in its stock value on Thursday as it reported its fourth-quarter earnings, which included a marginal miss on adjusted earnings per share while surpassing revenue expectations. Despite the overall revenue beat, the company confronted headwinds from its smokeable products division, where shipment volumes declined and promotional spending rose, affecting its financial performance.
For the quarter, Altria posted adjusted earnings per share (EPS) of $1.30, slightly below the consensus estimate of $1.32 held by analysts. On the revenue front, however, the company recorded $5.846 billion, which was down 2.1% compared to the same quarter in the previous year but nonetheless exceeded the projected $5.028 billion.
The revenue downturn was largely attributed to lower net proceeds within the smokeable products category, where revenues net of excise taxes fell by 0.5% to $5.1 billion. This segment’s performance was impacted by a 2.7% reduction in net revenues from smokeable yields, resulting mainly from decreased shipment volumes and increased promotional expenditures. These factors were partly mitigated by favorable pricing adjustments. When excluding excise taxes, revenue from this segment declined by 1.1% during the quarter.
Significant details from Marlboro, Altria’s flagship brand, highlight a contraction in its retail market share. Marlboro’s share of the total cigarette market stood at 39.8%, reflecting a decline of 1.5 percentage points year over year and 0.6 percentage points sequentially. Within the premium cigarette segment, Marlboro held a 59.2% share, showing a modest decrease of 0.1 percentage points year over year and 0.4 percentage points from the previous quarter.
Conversely, the oral tobacco segment demonstrated positive momentum. Net revenues climbed by 2.0%, driven primarily by pricing improvements, although this was somewhat offset by lower shipment quantities and an unfavorable shift in product mix. Excluding excise taxes, revenues in this category increased by 2.9% for the quarter.
Despite the challenges encountered, gross profit for the quarter modestly increased by 0.7%, reaching $3.631 billion. Yet, operating income encountered a sharp decline of 40.9% year over year, descending to $1.753 billion.
At the end of the quarter, Altria's liquidity position remained solid, with cash and cash equivalents totaling $4.474 billion, reflecting a robust balance sheet even amid operational pressures.
Looking ahead, Altria provided guidance for fiscal 2026, forecasting adjusted EPS in a range between $5.56 and $5.72 per share. This outlook is closely aligned with the analyst consensus estimate of $5.58. The company anticipates that adjusted diluted EPS growth will predominantly materialize in the second half of 2026, driven by a gradual increase in cigarette import and export activities as the year progresses.
Regarding tax considerations, Altria expects its effective adjusted tax rate for 2026 to settle between 22.5% and 23.5%. Capital expenditures are planned to range from $300 million to $375 million, while depreciation and amortization costs are projected to approximate $225 million.
Following the earnings release, Altria's share price declined by 3.19% to $61.11 as reported on Thursday. This movement reflects investor reactions to the combined impact of the earnings shortfall and segment-specific challenges detailed in the quarterly report.
Key Points
- Altria’s adjusted EPS for Q4 was $1.30, missing analyst expectations slightly against a projection of $1.32.
- Fourth-quarter revenues totaled $5.846 billion, surpassing consensus estimates despite a year-over-year decline.
- The smokeable products segment experienced shipment reductions and higher promotional spending, leading to lower net revenues.
- Oral tobacco revenues grew, offsetting some losses in the smokeable products category.
- Operating income declined substantially by 40.9% year over year, reflecting operational challenges.
Risks and Uncertainties
- Decreased shipment volumes and increased promotional expenses in the smokeable products segment may pressure future revenues.
- Marlboro’s declining market share in both the total cigarette category and the premium segment could impact long-term brand strength.
- Shift in product mix within oral tobacco presenting potential revenue challenges despite overall growth.
- Projected growth in adjusted EPS is weighted toward the latter half of the fiscal year, implying potential near-term volatility.