Altria: Stuck in a Ditch in Q4, Awaiting Government Rescue

Company Update (MO US) (Buy)

The Tobacco earnings algorithm has broken down, and both revenue and Operating Income fell in Q4.

Highlights

• Revenues, Operating Income and Net Income all fell in Q4

• Cigarette volume fell 10%, clearly cannibalized by e-vapor

• Price realization and cost efficiency have both diminished

• Altria has ~4% share in e-vapor, lost share in nicotine pouches

• At $41.36, we see 11.6% IRR, driven by 9.5% Dividend Yield

Introduction

Altria reported Q4 2023 results on Thursday (February 1). Shares finished the day up 4%, before falling back 1% on Friday. Altria’s share price has now fallen 11.8% in the past year, generating a loss of 3.7% after dividends:

Altria Share Price (Last 1 Year)

Source: Google Finance (03-Feb-24).

Q4 2023 results showed the traditional Tobacco earnings algorithm has broken down for Altria. Cigarette volumes fell 9% year-on-year on an adjusted basis and, even with the benefit of inventory and lagging excise duties, group revenues and operating income both fell. Altria attributed the volum…