Marlboro. Pixabay Image
This article presents the comparison between Philip Morris International (NYSE:PM) and Altria Group (NYSE:MO) from a variety of perspectives, including the companies’ revenue, sales volumes, profitability, margins, debt, CEO salaries, etc.
For your information, Philip Morris International and Altria Group used to be in the same conglomerate but they split up more than 10 years ago.
Now, both companies operate independently, with each having its own stock symbols and also with headquarters located in different locations.
Therefore, investors who are interested to invest in tobacco companies such as Philip Morris International and Altria Group can now buy their stocks separately.
However, which stock warrants a better buy?
Which company’s products make better money?
Which one operates more efficiently and returns more cash to shareholders?
We will find all these out in this article.
Let’s start with the topics below.
Table Of Contents
Revenue
A1. Total Revenue
A2. Combustible Products Revenue
A3. Smoke-Free Products Revenue
Product Sales Volumes
B1. Combustible Products Sales Volume
B2. Smoke-Free Products Sales Volume
Revenue Per Unit Of Product Sold
C1. Revenue Per 1000 Units Of Combustible Products
C2. Revenue Per 1000 Units Of Smoke-Free Products
Profitability
D1. Gross Profit – GAAP
D2. Operating Profit – GAAP
D3. Net Profit – GAAP
Margins
E1. Gross Margin – GAAP
E2. Operating Margin – GAAP
E3. Net Margin – GAAP
Results By Number Of Employees
F1. Total Employees
F2. Revenue Per Employee
F3. Profit Per Employee
Debt And Leverages
G1. Total Debt
G2. Debt Leverage With Respect To EBITDA
Cash Flow And Margins
H1. Net Cash From Operations
H2. Free Cash Flow
H3. Operating Cash Flow Margin
H4. Free Cash Flow Margin
Capital Returns
I1. Share Repurchase
I2. Dividends Declared
I3. Dividend Per Share Declared
I4. Total Capital Returns
CEO Salaries
J1. Comparison Of CEO Salaries
Risks
Conclusion And Reference
S1. Conclusion
S2. References and Credits
S3. Disclosure
Total Revenue
revenue-excluding-excise-taxes
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On a consolidated basis, Philip Morris International earns much higher revenue, roughly $10 billion more to be exact.
More importantly, between fiscal 2016 and 2022, Philip Morris’ revenue had grown by nearly 20% while Altria’s revenue had grown by only 10%.
Therefore, Philip Morris International not only earns more money but also has much better revenue growth, nearly twice the rate of Altria to be exact.
Combustible Products Revenue
combustible-products-revenue
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The combustible product revenue is derived primarily from products such as cigarettes and cigars.
That said, Philip Morris International earns slightly higher combustible product revenue than Altria does.
Although Philip Morris International makes slightly more money, its revenue figures in this segment have been on the decline while that of Altria has been on the rise.
As seen, Philip Morris International’s combustible revenue has declined by 17% while Altria’s figure has increased by 10% since fiscal 2016.
Smoke-Free Products Revenue
smoke-free-products-revenue
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While Philip Morris International’s combustible products revenue has been on the decline, it is the opposite of the company’s smoke-free products revenue.
As seen, Philip Morris International’s smoke-free products revenue has multiplied by more than 10X while Altria’s smoke-free products revenue has grown by only 31% since 2016.
Therefore, Philip Morris International has much better business prospects in the smoke-free products category compared to Altria.
Combustible Products Sales Volume
combustible-products-shipment-volumes
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For combustible products shipment, Philip Morris International has much higher volumes compared to Altria, roughly 7X Altria’s figure in fiscal 2022.
A trend worth saying is that the combustible product shipment volumes of both companies have declined considerably over the years.
Smoke-Free Products Sales Volume
smoke-free-products-shipment-volumes
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Philip Morris International’s smoke-free product shipment volumes are much higher than Altria’s figures and have multiplied by more than 10X since 2016.
On the other hand, Altria’s smoke-free product sales volumes have in fact been on the decline during the same period.
Revenue Per 1000 Units Of Combustible Products
revenue-per-1000-units-of-combustible-products
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While Altria ships significantly fewer combustible products compared to Philip Morris International, it earns much higher revenue on a per-unit basis.
As shown in the chart above, Altria’s revenue per 1,000 units of combustible products is 6X the value of Philip Morris International’s.
Revenue Per 1000 Units Of Smoke-Free Products
revenue-per-1000-units-of-smoke-free-products
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Similarly, Altria also earns much higher revenue per 1,000 units of smoke-free products than Philip Morris International does.
In fact, Altria’s figures are massively much higher compared to those of Philip Morris International.
Gross Profit – GAAP
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From the perspective of gross profit, Philip Morris International generates much higher gross profit than Altria does.
As of fiscal 2022, Philip Morris International’s consolidated gross profit was roughly $6 billion higher than Altria’s figure.
Operating Profit – GAAP
operating-profit
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While Altria produces a considerably smaller gross profit, its operating profit is comparable with that of Philip Morris International.
In fact, Altria’s operating profit has increased tremendously over the years and reached nearly the same level as that of Philip Morris International as of fiscal 2022.
Philip Morris International’s gross profit also has increased since 2016 but not as profoundly as Altria, indicating the much larger and possibly growing operating costs and expenses that the company incurred over the years.
Net Profit – GAAP
net-profit
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While Altria operates more efficiently than Philip Morris International does, it produces inconsistent net profit.
As seen, Philip Morris International’s net income has been far more consistent than Altria’s figures.
In fact, Philip Morris International’s net profit has consistently increased over the years and reached a 6-year high of $9.5 billion as of fiscal 2022, nearly twice as much as Altria’s $5.8 billion of net profit generated in the same fiscal year.
Altria’s consistent net profit has been due primarily to years of failed investments which have resulted in impairment charges, losses from investments in equity securities, and losses on financial instruments.
Gross Margin – GAAP
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Despite having a much lower gross profit, Altria’s gross margin is comparable with that of Philip Morris International.
In fact, Altria’s gross margin even surpassed that of Philip Morris International in fiscal 2022 when it soared to nearly 70%.
Operating Margin – GAAP
operating-margin
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As mentioned, Altria is a far more efficient company compared to Philip Morris International from the perspective of operations.
Altria’s operating efficiency is reflected in the operating margin of the company.
As seen in the chart above, Altria’s operating margin is far superior to that of Philip Morris International, nearly twice as much as Philip Morris International’s figure in fiscal 2022.
Net Margin – GAAP
net-margin
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Altria fares badly compared to Philip Morris International when it comes to net margin.
In this aspect, Philip Morris International produces far more consistent net margins.
As explained earlier, Altria’s inconsistent net margins have been due to the company’s impairment charges, losses from investments in equity securities, and losses on financial instruments.
Total Employees
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Philip Morris International has far more employees than Altria does, which is more than 10X the figure for fiscal 2022.
Revenue Per Employee
revenue-per-employee
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Since Altria has far fewer employees, its revenue per employee is far superior to that of Philip Morris International.
As shown in the chart above, Altria boasts revenue per employee that exceeds $3 million USD for fiscal 2022 and this number has risen significantly over the years.
On the other hand, Philip Morris International’s revenue per employee totals only $400,000 for fiscal 2022, only a fraction of Altria’s figure.
Profit Per Employee
profit-per-employee
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Similarly, Altria’s profit per employee clocked $1.9 million USD for fiscal 2022 which was more than 10X the figure of Philip Morris International.
The far higher profit per employee illustrates Altria’s much higher efficiency compared to Philip Morris International.
Total Debt
total-debt
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The debt levels of both companies had been nearly the same.
However, in fiscal 2022, Philip Morris International’s total debt soared significantly to $43 billion compared to Altria’s total debt of only $27 billion.
Therefore, Philip Morris International has much higher debt levels than Altria.
Debt Leverage With Respect To EBITDA
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With respect to the adjusted EBITDA, Philip Morris International definitely has much higher debt leverage.
As seen in the chart above, the total debt to EBITDA ratio for Philip Morris International soared to 3.12X in fiscal 2022 while that of Altria declined to 2.15X in the same period.
Net Cash From Operations
net-cash-from-operations
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Philip Morris International generates slightly higher operating cash flow than Altria does.
A trend worth mentioning is that both companies not only produce positive operating cash flow but the figures also have been on the rise.
In short, both Philip Morris International and Altria have solid operating cash flows.
Free Cash Flow
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Similar to the net cash from operations, both companies have solid free cash flow.
However, Philip Morris International generates slightly higher free cash flow than Altria does.
Operating Cash Flow Margin
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While Philip Morris International generates higher operating cash flow, the company is less efficient compared to Altria.
As seen in the chart above, Altria produces much higher operating cash flow per unit of revenue as reflected in the higher operating cash flow margin for the last several years.
As of fiscal 2022, Altria’s operating cash flow margin came in at 40% compared to only 34% for Philip Morris International.
Free Cash Flow Margin
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Similarly, despite having a much higher free cash flow, Philip Morris International is less efficient compared to Altria when it comes to free cash flow per unit of revenue.
As seen in the chart above, Altria is much more efficient at producing free cash flow compared to Philip Morris International.
Share Repurchases
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Philip Morris International spends significantly less on share repurchases compared to Altria.
As shown in the chart above, Philip Morris International bought back its shares only in 2 out of the 7 fiscal years between 2016 and 2022.
Moreover, the amount spent on share repurchases is significantly less compared to that of Altria.
For your information, Altria just authorized a new $1.0 billion share repurchase program as of Jan 2023, and is expected to be completed by Dec 2023.
While Philip Morris International authorized a share repurchase of up to $7 billion in 2021, the program got suspended in 2022 when the company acquired Swedish Match and is not expected to be restarted anytime in 2023.
Dividends Declared
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While Philip Morris International spends significantly less on share repurchases, it spends significantly more on cash dividends.
As shown in the chart above, Philip Morris International’s cash spent on dividends is much higher than Altria’s.
What counts the most is that the cash spent on dividends for both Philip Morris International and Altria is on the rise.
Dividends Per Share Declared
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On a per-share basis, Philip Morris International’s cash dividend is much higher compared to Altria.
While Philip Morris International’s figures are much higher, Altria’s dividends per share also are not far behind.
In fact, Altria’s dividend growth rates are much better than Philip Morris International’s.
Between 2016 and 2022, Altria’s dividend growth rate clocked 57% compared to only 22% for Philip Morris International.
Total Capital Returns
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In terms of total capital returns, Altria’s numbers are comparable with that of Philip Morris International despite having much smaller amounts of dividends declared.
In fact, in some of the fiscal years, Altria’s total capital returns even exceeded that of Philip Morris International by a very large margin, illustrating the solid capital returns of the company.
Comparison Of CEO Salaries
CEO Salaries in USD
| FY2022 Salary In USD | ||
|---|---|---|
| Philip Morris | Altria | |
| Base Pay | $1,461,248 | $1,333,333 |
| Bonus + Non-EquityIncentive Comp | $4,556,303 | $8,150,000 |
| Total Cash Comp | $6,017,551 | $9,483,333 |
| Stock Award Value | $9,751,292 | $6,500,044 |
| Option Award Value | $0 | $0 |
| Total Equity | $9,751,292 | $6,500,044 |
| Other | $6,265 | $216,323 |
| Total Compensation | $15,775,108 | $16,199,700 |
The CEO salaries of both companies are nearly the same and do not differ much.
However, the CEO of Altria made a slightly higher salary in 2022 at $16.2 million USD compared to $15.8 million USD for Philip Morris International.
Geopolitical Risks
Altria’s operations are based primarily in the U.S. while that of Philip Morris International is primarily outside of the U.S.
Therefore, each company comes with different geopolitical risks.
For example, Altria’s geopolitical risks are only limited to those in the U.S.
On the contrary, Philip Morris International’s risk factors are more diverse and hard to predict.
The recent Russia-Ukraine war has severely impacted Philip Morris International’s operations in both of these countries while Altria is largely unaffected.
Therefore, Philip Morris International is a riskier bet.
Conclusion
In terms of volume and sales revenue, Philip Morris International has an edge over Altria.
However, in terms of efficiency, Altria wins hands down.
For example, Altria’s profit and cash flow margins are way ahead of Philip Morris International.
Also, Altria edges slightly ahead when it comes to capital returns because the company spends considerably on stock repurchases compared to the tiny amount spent by Philip Morris International.
For your information, Philip Morris International’s $7 billion share repurchase program got suspended in 2022 indefinitely.
Despite the higher dividends per share declared by Philip Morris International, the dividend yield came in at only 5% while Altria’s dividends yield more than 8%.
Also, Philip Morris International carries higher debt and is more leveraged than Altria.
Although Altria operates more efficiently, produces a higher dividend yield, and carries less debt, its growth is limited to only the U.S.
On the contrary, Philip Morris International’s smoke-free opportunities are huge at the global level.
As seen in prior discussions, Philip Morris International’s smoke-free products shipment volumes and revenue have more than multiplied by 10X in just 7 years while that of Altria has remained roughly unchanged.
Therefore, Altria is a safer bet while Philip Morris International is more about growth.
Let us know what you think by leaving a comment below.
References and Credits
1. All financial figures presented in this article were obtained and referenced from the companies’ respective earnings releases, SEC filings, shareholders letters, presentations, etc, which are available in Altria Investor Relations and PMI Investor Relations.
2. Featured images in this article are obtained from Pixabay.
Disclosure
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