Altria Group Inc (NYSE:MO, ETR:PHM7) reported an earnings beat for the second quarter, along with raising the lower end of its full-year profit guidance.
Adjusted diluted earnings per share (EPS) came in at $1.44, up 8.3% from the same period last year, exceeding the analyst estimate of $1.39.
Revenue was $2.29 billion, slightly ahead of the consensus $2.2 billion.
The company also narrowed its full-year adjusted EPS guidance to a range of $5.35 to $5.45, compared to the prior $5.30 to $5.45 range.
Jefferies analysts see the quarter as a mixed bag. “We see a two-way pull between the EPS beat-and-raise and one, the continued volume and downtrading-driven pressure in Combustibles, and two, the accelerating share losses in Oral Tobacco, where on! volume growth is lagging behind Traditional Oral declines,” they wrote.
Altria's smokeable products segment outperformed expectations, with operating income up 4.2% to $2.95 billion despite a 9.9% drop in volumes, better than Jefferies' forecast of a 14.7% volume decline, 6% drop in sales, and just 0.8% EBIT growth.
In oral tobacco, operating income increased 10.9% to $500 million. The modern oral pouch brand on! grew volumes by 26.5%, up from 18% in Q1.
Nonetheless, these gains were not enough to offset losses in traditional oral tobacco, which declined 8.1%, Jefferies noted. As a result, the total oral tobacco retail share fell 460 basis points to 33.1%.
Altria attributed some of the decline in cigarette volumes to “the continued growth of flavored disposable e-vapor products, the majority of which we believe have evaded the regulatory process.”
Jefferies also highlighted that “lack of positive signals regarding enforcement of regulation on illicit eVapour products or the potential market comeback of Altria's NJOY ACE devices” remains a concern.
While the results offered some support to industry peers like British American Tobacco ahead of their own earnings release, Jefferies sees limited upside for Altria shares near term.
“Fiscal 2025 guidance, corridor narrowed but Street already there,” they wrote. “The company has narrowed the fiscal 2025 adjusted diluted EPS guidance range to $5.35 to $5.45 versus $5.30 to $5.45 previously. However, Street estimates $5.4 are already in line with the mid-point of the updated guidance range.”