Altria revenue falls short as cigarette shipments decline, buys rest of On brand

A Philip Morris Marlboro brand cigarette burns in an ashtray for this arranged photograph in Tiskilwa, Illinois, on Wednesday, July 12, 2017.

Daniel Acker | Bloomberg | Getty Images

Altria‘s first-quarter earnings declined as revenue fell short of estimates and cigarette shipments continue to decline.

The parent of Marlboro cigarettes has been shifting its business away from traditional tobacco products, and announced it acquired the remaining 20% stake in On, a nicotine pouch product.

The company’s stock was down 1.1% lower in late morning trading.

Here’s what the company reported for the first quarter compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.07 adjusted vs. $1.05 expected
  • Revenue: $4.88 billion, excluding excise taxes, vs. $4.98 billion expected

Net income decreased to $1.42 billion, or 77 cents per share, from $1.55 billion, or 83 cents per share, a year earlier. 

Excluding items, Altria earned $1.07 per share, topping the $1.05 per share expected by analysts surveyed by Refinitiv. 

Revenue fell 5.1% to $6.04 billion from $6.36 billion a year earlier. However, after excluding excise taxes, its revenue was $4.88 billion, which was shy of the $4.98 billion, analysts expected.

Total cigarette shipments to wholesalers fell 12% year over year. However, Altria estimates cigarette industry shipments fell 2% in the quarter, which was flat with year-earlier levels.

Altria once again lowered the value of its Juul vaping brand, this time writing its value down by $200 million. The company said the fair value of its stake, which it acquired for $12.8 billion in December 2018, was worth $1.5 billion at the end of March.

Although the total vaping category increased 24% year over year, Juul’s retail share fell 6% year over year to 33% of the category, the company said.

“Against a challenging comparison, our tobacco businesses performed well in the first quarter and we continued to make progress advancing our non-combustible portfolio,” said CEO Billy Gifford.

The Food and Drug Administration, which regulates tobacco products in the U.S., said Thursday it will propose a ban on menthol-flavored cigarettes. Menthol cigarettes have often been disproportionately used by people of color. The vast majority of Black smokers use menthol cigarettes, and Black men have the highest rates of lung cancer deaths in the U.S.

In addition, the Biden administration announced last week that it is considering placing a cap nicotine levels in cigarettes. If this policy is pursued, tobacco companies are likely to challenge it.

Altria previously sent a letter to the FDA asking it to spread the word that nicotine, the addictive ingredient in cigarettes, doesn’t cause cancer. The company said this would help smokers transition to potentially less risky noncombustible options, such as their heated tobacco stick Iqos and nicotine pouch On.

See the full earnings release here.

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