Altria Group (NYSE: MO) is more than a cigarette company.
For years, Altria has been expanding into various industries, including cannabis, while simultaneously strengthening its core tobacco businesses.
At the end of 2022, Altria owned the following subsidiaries:
- Philip Morris USA – the maker of Marlboro cigarettes
- U.S. Smokeless Tobacco Company – the maker of Copenhagen and Skoal
- John Middleton – the maker of Black & Mild cigars
- Helix Innovations – the maker of on! oral nicotine pouches
In addition to the businesses above, Altria also had strategic investments and agreements with other companies:
- 35% economic interest in JUUL Labs – U.S. leading e-vapor company
- 10.1% ownership in Anheuser-Busch InBev – the world’s largest brewer
- 45% ownership in Cronos Group – a leading global cannabinoid company
- Exclusive U.S. license to commercialize Philip Morris International’s IQOS product – the only heated tobacco product authorized by the US FDA
In short, Altria aims to diversify from cigarettes into a portfolio of businesses, including tobacco, cannabis, and smokeless products.
In this article, we will explore several statistics of Altria Group, which include revenue, profitability, margins, and growth rates.
Let’s take a look!
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Altria has two main business segments, one of which is smokeable tobacco products, while the other deals with oral tobacco products.
Altria’s primary products in the smokeable tobacco segment are combustible cigarettes from Philip Morris USA and machine-made large cigars and pipe tobacco from Middleton.
On the other hand, the primary products in the oral tobacco segment consist of MST and snus products manufactured and sold by USSTC and oral nicotine pouches manufactured and sold by Helix.
In addition to its primary segments, Altria also owns a financial services business, an IQOS System heated tobacco business, and Helix ROW.
However, their financial contributions have been insignificant and are included in all others.
Furthermore, Altria used to own a wine business operated under a subsidiary called Ste. Michelle, but the wine business was divested entirely in 2022.
How Does Altria Earn Revenue
Altria generates a significant portion of its revenue from cigarette sales through its wholly-owned subsidiary, Philip Morris USA.
Philip Morris USA is the largest cigarette manufacturer in the United States, producing and selling cigarettes exclusively to customers within the country. For over 45 years, Marlboro has been the best-selling cigarette brand in the U.S.
Altria’s revenue is also supplemented by other products, including cigars and pipe tobacco marketed and sold by Middleton, moist smokeless tobacco (MST) marketed and sold by USSTC, oral nicotine pouches sold by Helix, and an exclusive right to commercialize certain of Philip Morris International’s heated tobacco products in the United States.
Despite efforts to divest from combustible products, cigarette sales remain Altria’s primary revenue source.
Altria adopts a business model where its tobacco subsidiaries sell their tobacco products principally to wholesalers (including distributors) and large retail organizations, including chain stores.
To help readers understand the content better, the following terms and glossaries have been provided.
Operating Company Income (OCI): OCI is a non-GAAP measure defined as operating income before general corporate expenses and amortization of intangibles, according to Altria. The purpose of the OCI is to evaluate the performance of, and allocate resources to, Altria’s business segments.
Revenue By Year
In fiscal 2022, Altria earned revenue of US$20.7 billion, a decline of 2% over 2021.
A noteworthy trend is that Altria’s revenue net of excise taxes has steadily risen since fiscal 2016.
Going into fiscal 2023, Altria’s revenue is estimated at US$21.2 billion, representing a year-on-year growth rate of about 2.4%.
This figure is calculated based on Altria’s guidance of between $4.91 and $4.98 in adjusted EPS for fiscal 2023.
Using a 42% adjusted net earnings margin and a growth rate of about 2% for the adjusted net earnings, Altria’s net revenue net of excise taxes for fiscal 2023 is projected to reach US$21.2 billion.
Revenue By Quarter
Altria earned quarterly revenue of US$5.3 billion, US$5.4 billion, and US$4.8 billion in 3Q, 2Q, and 1Q 2023, respectively.
Altria’s quarterly revenue of US$5.3 billion reported in 3Q 2023 was 2% lower than the same quarter a year ago.
Revenue By TTM
The quarterly plot may not display the trend of Altria’s revenue.
Therefore, I created the TTM plot above to present Altria’s revenue trend.
Altria’s revenue grew the most during the pandemic starting in fiscal 2020, but it remained flat in post-pandemic periods, as shown by the TTM plot.
As of 3Q 2023, Altria’s TTM revenue reached US$20.6 billion, roughly in line with the quarter a year ago.
Therefore, the primary concern is that Altria’s revenue may remain stagnant or decline.
Growth Rates Of Revenue By TTM
The growth rate plot above shows that Altria’s revenue growth has remained stagnant in post-pandemic periods.
In fact, the growth rates were negative in the most recent quarters, indicating that revenue had declined year-on-year over the past several quarters.
Altria’s revenue growth had been the most robust during the pandemic between 2020 and 2021, as shown in the chart above.
Therefore, worrying about a decrease in revenue during the post-pandemic era is a legitimate concern.
Net Earnings And Earnings Per Share
Altria is not just a profitable company but a highly profitable one, as shown in the growing adjusted net earnings and adjusted EPS.
In fact, Altria has never made a loss for any of the periods presented in the chart.
As seen, Altria’s adjusted net earnings and EPS have significantly risen since 2016 and reached US$8.7 billion and US$4.84 per share, respectively, as of 2022.
For fiscal 2023, Altria’s adjusted net earnings are estimated at US$8.9 billion, while adjusted EPS is expected to come in at US$4.95 on average.
Gross Margin, OCI Margin And Operating Profit Margin
Altria is not just a profitable company but an insanely profitable one.
As seen, Altria’s gross margin tops nearly 70% as of 2022 on a consolidated basis, a record figure in the last seven years.
Altria has been able to increase its gross margin over time due to its ability to raise prices consistently.
Altria’s consistent price rise illustrates the company’s strong brand power and massive moat in the U.S.
In addition to the gross margin, Altria’s operating efficiency has also improved, as reflected in the growing OCI margin and operating income margin presented in the chart above.
For example, Altria’s OCI margin has risen from 46.6% in 2016 to 59.4% as of 2022, while the operating profit margin has risen from 45.3% in 2016 to 57.6% as of 2022, a record figure since 2016.
Therefore, Altria is capable of raising prices and operating efficiently.
In short, Altria runs a high-margin business.
Revenue By Product Segment
Altria fully divested its wine segment in 2021; therefore, the revenue for wine products has come to nil as of 2022.
That said, Altria’s revenue from the smokeable product segment is among the largest, topping US$18.2 billion in 2022.
On the other hand, Altria earned only US$2.5 billion in revenue under the oral tobacco product segment, a much smaller figure than the smokeable product segment.
While revenue has steadily risen in the smokeable product segment, the oral tobacco product segment has grown much faster.
Since 2016, revenue from the smokeable product segment has risen by only 10%, while the oral tobacco product segment has risen by a massive 32%.
Therefore, the oral tobacco product segment has a much faster revenue growth than the smokeable product segment.
Revenue By Product Segment In Percentage
From a percentage perspective, Altria’s smokeable product revenue accounted for 88% of its total revenue in 2022, the highest figure ever reached since 2016.
This ratio steadily rose and grew particularly fast in 2022 after the wine product segment was divested.
On the other hand, Altria’s oral tobacco product segment accounted for only 12% of its total revenue in 2022.
This ratio has also steadily increased, but it is not enough to reduce the company’s dependence on cigarette sales.
Therefore, as of 2022, Altria was still pretty much a cigarette company.
Growth Rates Of Revenue By Product Segment
Altria’s revenue growth across all segments was among the lowest in 2022, as shown in the chart above.
As seen, Altria’s smokeable or combustible product revenue grew only 0.4% year-on-year in 2022 compared to 1% and 6.5% reported in 2021 and 2020, respectively.
Altria’s revenue growth in the oral tobacco product segment was -0.6% in 2022, a decline from 3% and 7.3% in 2021 and 2020, respectively.
The chart indicates Altria’s oral tobacco product segment experienced negative growth for the first time since 2017.
A major concern is that Altria’s revenue growth in the oral tobacco segment has significantly slowed in post-pandemic periods compared to pre-pandemic results, and this trend may continue in the foreseeable future.
Profitability By Product Segment
Altria’s smokeable or combustible product segment is among the most profitable, with an OCI topping nearly $11 billion as of 2022, a far higher figure than any other segment.
Apart from being the largest, the profitability of the smokeable product segment has significantly risen since 2016 and grown much faster than the oral tobacco product segment, despite its size.
For example, Altria’s smokeable product OCI grew by 3% in 2022 compared to a growth rate of just 0.4% for the oral tobacco segment.
Although the OCI of the oral tobacco product segment is far smaller, it has significantly grown since 2016 and reached US$1.6 billion as of 2022.
Altria’s wine segment was not profitable due to its smaller OCI compared to other segments.
As seen in the chart, it suffered an OCI loss of up to US$360 million in fiscal 2020 before turning a profit of just US$21 million in 2021.
Therefore, Altria divested its wine business in 2021 to avoid further losses in 2022.
Again, in 2023, Altria remained primarily a cigarette company, with the majority of its profits coming from combustible products.
Margin By Product Segment
Altria’s oral tobacco product segment was seen as having a much higher OCI margin than the smokeable production segment.
Therefore, Altria’s oral tobacco product segment is much more profitable than the combustible product segment despite having a far lower OCI.
As of 2022, Altria’s OCI margin in the oral tobacco product segment topped 66%, while the combustible product segment came in at 59%.
Although the oral tobacco product segment was more profitable, its margin has declined recently.
Altria achieved a peak OCI margin of 71.5% in fiscal year 2020 in the oral tobacco product segment.
However, this ratio has declined to only 66.3% as of 2022, the lowest since 2021.
Growth Rates Of Profitability By Product Segment
The growth rate plot above shows that the profitability of Altria’s oral tobacco product segment has significantly slowed in post-pandemic periods.
As seen, Altria experienced consecutive negative OCI growth rates in the oral tobacco product segment in 2021 and 2022, at -3.4% and -1.6%, respectively.
Although smokeable product OCI growth rates remained positive, they significantly slowed post-pandemic.
As of 2022, Altria’s OCI growth rate in the smokeable product segment was only 2.8%, the lowest since 2020.
Therefore, the concern over slowing profit growth and declining margins in both the smokeable and oral tobacco product segments is legitimate.
Altria’s main revenue and profit still came from the smokeable or combustible product segment, whose primary products are cigarettes and cigars.
The company has not seen significant progress in the oral tobacco product segment, where margins have decreased and profitability has declined, especially during the post-pandemic period.
In summary, Altria was still pretty much a cigarette and cigar company as of 2022.
References and Credits
1. All financial figures presented in this article were obtained and referenced from Altria’s annual and quarterly reports, SEC filings, investor presentations, earnings reports, press releases, etc., which are available in Altria Investors Relation.
References and examples such as tables, charts, and diagrams are constantly reviewed to avoid errors, but we cannot warrant the total correctness of all content.
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