Altria Group, Inc. (MO) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance with increased EPS guidance, substantial dividends, and share repurchases. The nicotine pouch market is expanding, and new product developments are underway, supported by regulatory advances. The Q&A section reveals strategic investments in manufacturing and import-export, despite some cost increases. Analysts appear positive, with concerns addressed by management's focus on growth and shareholder returns. Overall, the company's initiatives and optimistic guidance suggest a positive outlook for the stock.
Key Financial Performance
Adjusted diluted earnings per share (EPS) Grew by 4.4% year-over-year. This growth was attributed to strong financial performance and strategic progress across the smoke-free portfolio.
Cash returns to shareholders Returned $8 billion to shareholders through dividends and share repurchases combined. This reflects the company's commitment to shareholder value.
Smokeable Products segment adjusted operating company income (OCI) Delivered over $11 billion for the full year, with adjusted OCI margins expanding by 1.8 percentage points to 63.4%. This was supported by robust net price realization of 8.4%.
Smokeable Products segment domestic cigarette volumes Declined by 10% for the full year and 7.9% in the fourth quarter. The decline was attributed to higher manufacturing costs and cross-category impacts from illicit flavored disposable e-vapor products.
Oral Tobacco Products segment adjusted OCI Increased by 1.3% for the full year, with adjusted OCI margins expanding by 0.1 percentage points to 67.9%. Growth in on! products contributed to this increase.
Oral Tobacco Products segment reported shipment volume Decreased by 5.5% for the full year. Growth in on! products was offset by lower MST volumes.
Nicotine pouch category growth Increased by 14% over the past 6 months, with oral nicotine pouches growing 10.4 share points year-over-year in the fourth quarter. Innovation in pouch formats and higher nicotine strength offerings drove this growth.
Marlboro retail share in the premium segment Declined by 1.2 share points for the full year, attributed to competitive dynamics and growth in the discount segment.
Middleton cigar shipment volume Increased by 1.8% for the full year, reflecting strong performance in the large mass cigar industry.
E-vapor category growth Grew approximately 15% in 2025, with illicit products representing approximately 70% of the category. Growth was driven by the widespread availability of illicit flavored disposable e-vapor products.
Dividends paid Paid $7 billion in dividends in 2025, marking the 60th increase in the last 56 years. This demonstrates the company's strong commitment to returning value to shareholders.
Share repurchases Repurchased more than 17 million shares for $1 billion under the $2 billion share repurchase program. This reflects the company's focus on capital allocation and shareholder returns.
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Operating Highlights
FDA Authorization for on! PLUS: Helix received marketing granted orders from the FDA for certain on! PLUS products, including MINT, Wintergreen, and Tobacco in 6 and 9-milligram nicotine strengths.
Ploom and Marlboro Heated Tobacco Sticks: Horizon submitted a combined PMTA and MRTPA to the FDA for these products.
Nicotine Pouch Innovation: Helix introduced on! PLUS with innovative pouch material and smooth flavor proposition, receiving positive consumer feedback.
International Expansion of Nicotine Pouches: on!, on! PLUS, and FUMi brands expanded to 40,000 retail locations across 7 markets, with 12 unique flavor offerings.
Growth in U.S. Nicotine Space: The estimated number of adult consumers in e-vapor and oral tobacco categories grew to almost 30 million, with smoke-free alternatives representing over 50% of the total nicotine space.
Shareholder Returns: Returned $8 billion to shareholders through dividends and share repurchases in 2025.
Cigarette Volume Decline: Domestic cigarette volumes declined by 10% for the full year, with adjusted declines of 9.5% after accounting for calendar differences and trade inventory movements.
Oral Tobacco Products Performance: Helix grew on! shipment volume by 11% to over 177 million cans, contributing to profitable growth in the oral tobacco segment.
Collaboration with KT&G: Entered a strategic collaboration to advance international modern oral, U.S. non-nicotine growth, and traditional tobacco operating efficiencies.
Regulatory Advocacy: Advocated for stronger enforcement against illicit e-vapor products and accelerated FDA market authorization for smoke-free products.
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Risk or Challenges
Illicit flavored disposable e-vapor products: The widespread availability of illicit flavored disposable e-vapor products is a significant challenge, as they evade regulatory processes and jeopardize the long-term tobacco harm reduction opportunity. These products represent approximately 70% of the e-vapor category, creating headwinds for legitimate market participants.
Regulatory enforcement and FDA authorization: The slow pace of FDA market authorization for smoke-free products and insufficient enforcement against illicit products create uncertainty and hinder the development of a well-regulated marketplace. This regulatory lag impacts the company's ability to compete effectively in the e-vapor and nicotine pouch categories.
Competitive pressures in nicotine pouches: Competitor promotional activity in the nicotine pouch category remains elevated, with average retail prices for competitors declining significantly. This creates pricing pressure and challenges profitability for Altria's Helix brand.
Decline in cigarette volumes: Domestic cigarette volumes declined by 10% for the full year, driven by factors such as cross-category impacts from e-vapor products and discretionary income pressures. This decline affects the profitability of the core tobacco business.
Economic pressures on discount segment: Persistent discretionary income pressures are driving growth in the discount cigarette segment, which impacts the premium segment and Marlboro's market share.
Impairment of e-vapor assets: Noncash impairment charges of $1.3 billion were recorded for e-vapor intangible assets and goodwill, reflecting challenges in the regulatory and competitive landscape for e-vapor products.
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Guidance & Outlook
2026 Financial Outlook: Altria expects to deliver 2026 full year adjusted diluted EPS in a range of $5.56 to $5.72, representing a growth rate of 2.5% to 5.5% from a $5.42 base in 2025. Growth is expected to be weighted to the second half of the year, reflecting a progressive increase in cigarette import and export activity.
Smoke-Free Product Strategy: Altria plans to continue investments in smoke-free product research, development, and regulatory preparations. The company aims to build a portfolio of FDA-authorized smoke-free products for adult smokers and nicotine consumers.
Nicotine Pouch Expansion: Helix plans to focus on generating trial for on! PLUS and retaining adopters for on! classic in 2026. The company also submitted PMTA applications for on! PLUS products in 6 additional flavor varieties across 3 nicotine strengths, with plans to bring these new products to the U.S. market.
International Smoke-Free Growth: Altria aims to expand its nicotine pouch portfolio internationally, leveraging brands like on!, on! PLUS, and FUMi. The company plans to use consumer insights from 2025 to inform future product development and accelerate international expansion.
E-Vapor Market Strategy: Altria intends to maintain a measured approach to investments in the e-vapor category until the regulatory framework is functioning as intended and enforcement actions address the illicit market. The company is focusing on responsible participation with products that meet consumer preferences.
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Shareholder Return Plan
Dividend Payments: In 2025, Altria paid $7 billion in dividends to shareholders. The Board raised the dividend by 3.9% in August, marking the 60th increase in the last 56 years.
Share Repurchase Program: Altria repurchased more than 17 million shares for $1 billion under its $2 billion share repurchase program. At the end of the fourth quarter, $1 billion remained under the current program, which expires at the end of 2026.
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Key Q&A
Q:Can you provide any color on the scope of the fiscal 2026 import-export program and its benefits?
A:The program involves upfront investments that are moderate and aim to set up the Richmond manufacturing center for international markets. The duty drawback initiative is designed to avoid competitive disadvantages and expand opportunities.
Q:Should the $300 million to $375 million CapEx investment level for 2026 be considered a one-time increase or a multiyear trend?
A:The primary driver of the increase is investments in the import-export business and smoke-free portfolio. While future CapEx guidance is not provided, the company is making disciplined investments that generally precede volume growth.
Q:Is the aggressive promotional strategy behind Basic tied to the import-export activity with KT&G?
A:The two decisions are independent. The Basic strategy targets stores where consumers face economic pressures, capturing consumers who might otherwise switch to deep discount brands. The import-export activity is unrelated to this strategy.
Q:What are your thoughts on Marlboro's retail share dropping below 40% and the potential cannibalization by Basic?
A:The strategy is to maximize long-term profitability while investing in Marlboro and growth categories. The company does not believe Basic is significantly impacting Marlboro, and analytics suggest no outsized impact.
Q:Are there any trends in smoking incidence among younger legal-aged nicotine users?
A:No significant trends were noted. The company emphasizes moving consumers to smoke-free products and supports expedited FDA authorization for such products.
Q:What is the pricing strategy for on! PLUS, and how does it compare to on! classic?
A:on! PLUS is positioned as a differentiated product commanding a premium price. E-commerce pricing reflects this premium, and introductory promotions will vary by state.
Q:Can you provide details on the double duty drawback initiative beyond the KT&G partnership?
A:The initiative focuses on matching exports with imports to maximize opportunities. Specific details about partnerships are not disclosed, but the company seeks to avoid competitive disadvantages.
Q:Why did controllable costs increase by 14.5% in Q4 compared to a 9-month run rate of 9.5%?
A:The increase is primarily due to investments in manufacturing processes for import-export, including new pack configurations and track-and-trace capabilities.
Q:Will on! PLUS be national in the first half of 2026, and are there any supply chain issues?
A:on! PLUS will be national by the first half of 2026. There are no supply chain issues, and consumer feedback has been positive.
Q:Why did you start on! PLUS distribution in three states instead of going national immediately?
A:The initial three states were chosen because the sales force had already sold the product into retailers there. The national rollout will follow in the first half of 2026.
Q:What explains the discrepancy between your comments on nicotine pouch pricing and Scanner data?
A:The company observed significant competitor promotions, including free cans, which impacted pricing. on! classic prices were up both sequentially and year-over-year.
Q:Is the 30,000-store target for Basic the ceiling, or could it expand?
A:The current target is slightly over 30,000 stores, but adjustments may be made based on consumer economic conditions.
Q:What is the payback time for investments in manufacturing facilities for import-export?
A:The payback period is less than a year, with strong returns on investment.
Q:Will the elevated costs seen in Q4 continue into Q1 and Q2 of 2026?
A:Yes, some elevated costs will continue in the first half of 2026, but the back half of the year is expected to see improved import-export volumes.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the scope of the import-export program, partnerships beyond KT&G, and exact volumes or shares for on! PLUS. They also did not clarify future CapEx trends or provide detailed insights into the Marlboro strategy adjustments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
FDA MINT
FDA smoke
FDA tobacco
FUMi appeal
FUMi brand
Full Conference
Group Full
Helix PMTA
Helix shipment
PLUS
adult consumer
category Helix
category product
consumer preference
core
development
expansion
flavor variety
harm reduction
intention
milligram
nicotine consumer
nicotine space
nicotine strength
number vapor
offering nicotine
opportunity
product adult
product consumer
research
review
smoke portfolio
smoke product
smoke progress
support
tobacco harm
variety nicotine
view nicotine
MO Transcript
Altria Group, Inc. (MO) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call highlights strong financial performance with increased EPS guidance, substantial dividends, and share repurchases. The nicotine pouch market is expanding, and new product developments are underway, supported by regulatory advances. The Q&A section reveals strategic investments in manufacturing and import-export, despite some cost increases. Analysts appear positive, with concerns addressed by management's focus on growth and shareholder returns. Overall, the company's initiatives and optimistic guidance suggest a positive outlook for the stock.
Altria Group, Inc. (MO) Q3 2025 Earnings Call Transcript
Positive10-30
The earnings call presents a mixed but overall positive picture. Strong financial metrics include an increase in oral tobacco margins and cigarette retail share. Despite a decline in shipment volume, the growth in the on! product line and increased retail share are positives. The Q&A reveals confidence in future performance and strategic initiatives like international expansion and product differentiation. Although there are concerns about deceleration in earnings growth and competitive pressures, the raised EPS guidance and share repurchase plan are positive signals. Given these factors, a positive stock price movement is likely.
Altria Group, Inc. (MO) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call presents a mixed outlook. While there are positive aspects like growth in the on! brand and strategic initiatives, there are also concerns such as the NJOY ACE market re-entry and challenges from illicit vapes. The guidance is cautious with a modest EPS growth projection. The Q&A highlights uncertainties, particularly regarding competitive challenges and regulatory issues. Overall, the sentiment is balanced, with no strong positive or negative indicators.
Altria Group, Inc. (NYSE:MO) Q1 2025 Earnings Call Transcript
Unknown4-30
The earnings call presents a mixed picture: while there are positive aspects such as increased EPS and shareholder returns, there are significant concerns about regulatory challenges, particularly with the NJOY ACE withdrawal and impairment charge. The Q&A reveals management's confidence in pricing strategies but acknowledges consumer pressures and market uncertainties. The overall sentiment is balanced by these opposing factors, leading to a neutral prediction for stock price movement.
MO Report
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