Altria Group, Inc. has just dropped its earnings report for 2024, and it’s got some serious buzz around it. The company behind big names like Marlboro and the e-cigarette brand NJOY has a lot going on, including impressive gains in its vape sales, stock buybacks, and plans to expand its reach in the energy drink market. Let’s dive into the numbers and the strategy behind Altria’s moves in 2024 and beyond.
2024 Financial Highlights: A Mixed Bag with Some Bright Spots
Let’s start with the key numbers. Altria’s total revenue for the year came in at $24.02 billion, a 1.9% dip from the previous year. However, after adjusting for excise taxes, the company’s revenue stood at $20.44 billion, which was pretty much flat compared to 2023. But here’s the kicker: when you look at adjusted diluted earnings per share (EPS), it rose by 3.4% to reach $5.12 per share, showcasing strong performance in its core business.
For Q4, Altria delivered a solid performance with $5.97 billion in total revenue, a 1.6% increase year-over-year. Adjusted EPS for the quarter surged 9.3%, coming in at $1.29. This was driven by strong operating income growth and a decrease in the number of shares outstanding due to the company’s stock buybacks. So, while overall revenue was a little soft, the earnings picture looks better.
Breaking Down the Business Segments
Tobacco Products: Still a Major Player, But Facing Challenges
Altria’s tobacco segment, which includes traditional cigarettes, saw a dip in revenue. For the year, revenue dropped 2.5%, and after accounting for excise taxes, it was down 0.8%. However, there was a silver lining: adjusted operating income increased by 2%, and operating margin improved to 61.6%.
As for volume, 2024 wasn’t a great year for Altria’s cigarette sales. Full-year shipments of combustible tobacco products dropped 10.2%, and the trend continued in Q4, where they fell 8.8%. However, cigars performed better, with a 2.9% increase in Q4, though for the year, cigar shipments were down by 1.5%. Marlboro, Altria’s flagship brand, had a slight market share dip to 41.7%. That said, the brand still maintained a dominant 59.3% share of the premium cigarette market in the U.S.
Smokeless Products: A Silver Lining
On the smokeless side, things were looking better. Altria’s smokeless tobacco products, including brands like Copenhagen and Skoal, saw a 4.1% increase in revenue for the year. Excluding excise taxes, smokeless revenue grew by 4.5%, and adjusted operating income jumped 5.2%, pushing the profit margin up to 67.8%. This positive trend continued in Q4, where smokeless revenue increased 2.7%, and operating income grew 13%.
As for volume, Altria saw a slight dip in shipments for smokeless products in 2024, with a 1% decline for the year. But the brand “on!” really stood out. This little gem of a smokeless product saw shipments soar by 40.2% for the year, and it exploded in the fourth quarter with a 44.4% growth.
NJOY’s Vape Business: Big Gains, But Legal Hurdles Loom
When it comes to vaping, Altria’s investment in NJOY is clearly paying off. For 2024, NJOY saw a substantial increase in sales of vape cartridges (also known as e-liquids). The company shipped 46.6 million vape cartridges and 5 million vape devices. In Q4, the vape cartridge shipments surged 15.3%, and vape device shipments jumped 22.2%. These numbers reflect the growing demand for vape products, particularly in the face of rising regulatory scrutiny.
But while the vape business is thriving, there are concerns on the legal front. The U.S. International Trade Commission (ITC) recently issued an unfavorable ruling for NJOY, and if this decision stands, it could have significant impacts on the brand’s future growth. The outcome of this case could shape the future of Altria’s vape ambitions, so it’s a waiting game at this point.
Shareholder Returns: Stock Buybacks and Dividends
Altria is clearly committed to rewarding its shareholders. In 2024, the company completed a massive $3.4 billion stock buyback program, repurchasing 73.5 million shares. This is part of the company’s ongoing strategy to return capital to shareholders and support the stock price. In addition to stock buybacks, Altria paid out $6.8 billion in dividends to its shareholders over the course of the year. In Q4 alone, Altria shelled out $1.7 billion in dividends.
Even better, the board authorized a new $1 billion stock buyback program for 2025, which they expect to complete by the end of the year. The company also plans to continue its dividend payouts, which have been a reliable source of income for investors.
2028 Long-Term Goals: Reevaluating Non-Tobacco Products
Looking further ahead, Altria has set ambitious long-term goals for 2028. The company aims to achieve a compound annual growth rate (CAGR) of mid-single digits for adjusted diluted EPS. In 2024, Altria achieved a 2.9% CAGR for adjusted EPS, while its dividend payout grew by 4.1%. However, the company’s goal to significantly increase its sales of non-tobacco products, especially in the vape and smokeless markets, has been hindered by the rise of illegal e-cigarette products and growing concerns over the safety of these products. Altria has acknowledged that they need to reassess their strategy in this area and adjust accordingly.
2025 Outlook: Cautiously Optimistic
Looking ahead to 2025, Altria is projecting a modest growth trajectory. The company expects its adjusted diluted EPS to come in between $5.22 and $5.37, a 2% to 5% increase over 2024. Factors like fewer shipping days, increasing regulation, and ongoing cost-saving initiatives are expected to shape the financial results for the year.
Altria has also provided guidance on other key metrics for 2025, including an expected adjusted effective tax rate of 23% to 24%, capital expenditures of between $175 million and $225 million, and depreciation and amortization expenses of around $290 million.
While Altria is largely optimistic about its core tobacco business, there’s still a lot of uncertainty. Shifting consumer behaviors, changing regulatory landscapes, and the potential for adverse rulings on its vape business all loom large.
Expanding into Energy Drinks: A Fresh Move into a New Market
One of the most exciting pieces of news from Altria’s 2024 earnings report is its investment in the energy drink market. The company has made a strategic move into the $14 billion convenience store energy drink sector by investing in a brand called “Proper Wild.” The natural energy drink brand focuses on using clean, plant-based ingredients that align with today’s health-conscious consumer trends.
According to Altria, research shows that 50% of energy drink consumers are interested in beverages with all-natural ingredients. Furthermore, 60% of current energy drink users believe there’s room for improvement in the products currently available. Altria sees an opportunity to tap into this market with Proper Wild, which has already begun selling through a select number of retail outlets.
Looking ahead, Altria plans to expand Proper Wild’s distribution in 2025. This could be a huge win for Altria as it seeks to diversify its product offerings and appeal to younger, health-conscious consumers. The company has set its sights on five non-nicotine product categories to commercialize by 2028, and Proper Wild is the first product in this lineup.
Beyond Energy Drinks: Exploring New Avenues
Altria is not stopping there. The company is actively exploring other avenues outside of its traditional tobacco business, with major investments in the cannabis, health and wellness, and healthcare industries. This includes developments in nicotine replacement therapies, plant-based vaccines, inhalation treatments, and oral treatments. While these areas are still in the early stages, they could play a significant role in Altria’s long-term growth strategy.
Conclusion: A Lot to Look Forward to
Altria’s 2024 earnings report shows the company in a somewhat transitional phase. While its core tobacco business remains a dominant force, Altria’s investments in vape products, energy drinks, and non-tobacco markets signal a forward-thinking approach to diversify its revenue streams. The future of its vape business, however, remains uncertain due to legal challenges. In the meantime, shareholders are being rewarded with stock buybacks and solid dividends.
If the company can continue to successfully expand into non-tobacco categories while managing regulatory hurdles, Altria could be well-positioned for long-term growth. As always, investors and consumers alike will be keeping a close eye on the company’s moves in the coming year. Stay tuned!
