Altria's Growth Masks Ongoing Revenue Concerns Amid Challenges

A recent report highlights Altria’s impressive stock performance, gaining over 30% in the past year. However, crucial metrics indicate deeper challenges, including a 2.5% revenue decline and ongoing struggles in its cigarette segment, necessitating investor caution.

Date: 10-11-2024

AI Rating: 5

Altria's stock has shown a significant positive trend, increasing over 30% in value within the last year. This surge can be attributed to the company's third-quarter 2024 earnings report, which generated excitement among investors. However, a deeper dive into the numbers reveals that the optimistic surface may mask underlying issues in the business.

In the first nine months of 2024, Altria reported a total of approximately $18 billion in revenue. Smokable products, particularly cigarettes from the Marlboro brand, constitute the vast majority of this revenue. Despite a focus on its recent acquisition of the NJOY vaping business, the income generated from this segment is negligible compared to the overall revenue. For reference, NJOY’s growth is categorized as “other” and contributed less than 1% to the overall revenue in the third quarter. While NJOY's shipments have seen significant percentage increases, it is essential to recognize that this is from a small base.

The core issue lies in Altria's declining cigarette business, which remains its primary source of revenue. The volume of Marlboro cigarettes fell by 7.5% in the third quarter and by 9.4% year-to-date through September 2024. Furthermore, despite regular price increases, these measures were insufficient to counteract the declining volume. This presents a concerning outlook for the company and indicates potential challenges to maintaining its current dividend yield of 7.5% in the long run. While the high yield may attract dividend investors, the continuous downturn in Altria’s cigarette sales raises questions about the sustainability of their operations.

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