Altria Group Inc. (MO) reported first-quarter results that surpassed Wall Street expectations, sending shares up about 7% in late-morning trading Thursday. The tobacco giant posted adjusted earnings of $1.32 per share on net revenues of $5.43 billion, topping analyst forecasts of $1.25 per share and $4.58 billion in revenue, according to LSEG data.
Pricing Power Offsets Volume Declines
The company leaned on stronger cigarette and oral tobacco pricing to counter falling shipment volumes, a persistent concern for investors. Domestic cigarette shipments declined 2.4% during the quarter, but higher prices helped boost net revenues by 3.2% year-over-year. Stripping out excise taxes, revenue climbed 5.3% to $4.76 billion.
Altria's smokeable products segment saw net revenues rise 2.9%, driven by pricing that more than compensated for lower volumes, increased promotional spending, and a consumer shift toward budget brands. The company estimated the overall U.S. cigarette market contracted by approximately 5% during the period.
Marlboro Holds Its Ground
While Marlboro shipments slipped 7.8%, the brand managed to slightly increase its share of the premium cigarette market compared to both the prior year and last quarter. Chief Executive Billy Gifford described the quarter as a “strong start to the year,” noting that Marlboro “strengthened its position” among premium cigarettes. However, discount brands continue to gain traction, with value cigarettes now accounting for 33.3% of retail sales, up 2.4 percentage points from a year ago.
Oral Tobacco and Nicotine Pouches
Altria's oral tobacco performance was mixed. The company's on! nicotine pouch brand shipped 46.2 million cans, up 17.6% year-over-year. However, on!'s share of the U.S. oral tobacco market slipped to 7.8%, and its share of the nicotine pouch segment dropped 4.2 points to 13.4%. Competition in the pouch market is intensifying, with Philip Morris International (PM) trimming its annual profit outlook last week amid regulatory concerns surrounding Zyn and increasing competition from British American Tobacco's Velo.
Outlook and Risks
Altria reaffirmed its 2026 adjusted earnings forecast of $5.56 to $5.72 per share, but pointed to sluggish e-vapor growth and lingering consumer uncertainty. The company's updated outlook incorporates softer e-vapor category growth, heightened economic pressure on adult nicotine users, and ongoing threats from unauthorized vape products, shifting regulations, litigation, and changes in consumer shopping behavior. Additionally, NJOY ACE is not expected to return to the market in 2026.
Despite these headwinds, the company returned $280 million to shareholders through buybacks during the quarter and paid $1.8 billion in dividends. Altria still has $720 million remaining on its $2 billion share repurchase authorization.
CEO Transition
Chief Executive Billy Gifford is set to step down in mid-May, marking the end of his tenure. The positive quarterly results provide some momentum as he prepares to hand over the reins. Simon Hales at Citi described the results as a “big beat,” noting that cigarette volumes outperformed analyst expectations, according to Reuters. Altria's numbers also benefited from contract manufacturing work for international companies, linked to exports and related tax rebates.
Altria's net income for the quarter was $2.18 billion, or $1.30 per share, up sharply from $1.08 billion, or 63 cents per share, in the year-ago period. The company's ability to generate strong earnings through pricing power remains a key focus for investors, even as the long-term decline in cigarette consumption continues.
