Q4 2024 Earnings Summary
- Strong performance of on! nicotine pouches: Despite price increases in Q4, on! experienced impressive volume growth and met profitability targets ahead of schedule. This indicates strong consumer resonance and the potential to continue compounding volumes at industry growth rates.
- Supply chain resilience for e-vapor products: Altria has diversified production facilities for NJOY away from China, reducing potential impacts from tariffs and trade tensions. This strategic move demonstrates Altria's ability to mitigate policy uncertainties and maintain product supply.
- Confident guidance and growth opportunities in smoke-free products: Altria feels good about the 2025 EPS growth guidance and sees opportunities as consumers are ready to move to smoke-free alternatives. The company emphasizes the potential for growth if the regulatory environment improves.
- Altria is experiencing increased pressure on cigarette volumes due to the proliferation of illicit e-vapor products, leading to significant shifts in adult tobacco consumer preferences away from cigarettes. The company estimates that cross-category impacts contributed approximately 3% to 4% to the cigarette industry decline over the last 12 months.
- The cumulative impact of inflation continues to pressure Altria's core consumer base, who are at the lower end of the socioeconomic status, potentially leading to downtrading and market share losses. Altria has observed this pressure manifesting in increased discount segment share and a decline in Marlboro's market share.
- Regulatory uncertainties, including potential policy changes such as the proposed nicotine cap and the possibility of having to pull NJOY ACE from the market at the end of March, could negatively impact Altria's business and earnings guidance.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Approximately 0% change (Q4 2024: $5,974M vs. Q4 2023: $5,975M) | Revenue remained stable as changes within individual business segments offset one another. The large smokeable products segment, along with the smaller oral tobacco and All Other segments, maintained near-balanced contributions despite evolving market pressures. |
Operating Income | +3% increase (Q4 2024: $2,882M vs. Q4 2023: $2,796M) | Operating efficiency improved due to better margin management and potential cost reductions. This modest gain reflects improvements in operational performance even though overall revenue stayed flat, suggesting strategic efforts to optimize expenses relative to prior performance. |
Net Income | +47% increase (Q4 2024: $3,039M vs. Q4 2023: ~$2,060M) | Net income saw a significant jump driven by stronger operational performance and possibly lower non-operating expenses or favorable tax impacts. This notable increase indicates that underlying operational gains were effectively translated into bottom-line profitability compared to the previous quarter. |
EPS (Basic & Diluted) | +53% increase (Q4 2024: $1.79 vs. Q4 2023: $1.17) | EPS growth outpaced revenue stability, reflecting the impact of the net income surge combined with share repurchase programs that reduced the number of shares outstanding. These factors led to improved per-share profitability relative to the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted Diluted EPS | FY 2024 | $5.07–$5.15, 2.5%–4% growth from $4.95 base | no current guidance | no current guidance |
Adjusted Diluted EPS | FY 2025 | no prior guidance | $5.22–$5.37, 2%–5% growth from $5.12 base in 2024 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Full-Year 2024 Adjusted Diluted EPS | FY 2024 | $5.07 to $5.15 | $6.54 (derived by summing Q1 2024: 1.21, Q2 2024: 2.20, Q3 2024: 1.34, Q4 2024: 1.79) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Cigarette volume declines | Consistently shown elevated declines (8–13%), attributed to illicit e-vapor competition and macro pressures. | Volumes declined 8.8% in Q4 and 10.2% for full year (11% adjusted); partly attributed to cross-category movement and secular decline. | Consistent focus on volume drop; heightened concern persists. |
Illicit disposable e-vapor competition | Cited as a major factor in accelerated cigarette volume declines; repeated calls for stricter enforcement. | Over 60% of e-vapor category is illicit products; posing a threat to legitimate harm reduction efforts; Altria reconsidering 2028 smoke-free goals. | Growing threat and negative sentiment; recurring focus on enforcement. |
Marlboro brand performance in the premium segment | Noted strong leadership with share around 59–59.4% in premium; resilience amid downtrading. | Marlboro expanded premium segment share to 59.4% in Q4; remains aspirational brand with consistent share gains. | Stable premium leadership; sentiment remains positive. |
Downtrading to discount brands and widening price gaps | Widening price gap sparked downtrading; discount share growth of 1–2 points in earlier quarters. | Discount segment grew 1.7 share points in Q4; Altria highlights consumer financial pressures leading to more affordable choices. | Continued mention; inflation keeps pressure high. |
Regulatory uncertainties (nicotine cap, PMTAs, NJOY) | Ongoing FDA enforcement challenges and PMTA progression discussed; NJOY approvals for menthol e-vapor. | Raised concerns over FDA’s slow product authorizations and illicit market chaos; NJOY’s 4th patent issue and PMTAs mentioned. | Unchanged emphasis on uncertain FDA actions; remains strategic risk. |
Expansion and performance of on! nicotine pouches | Continued share growth (up to ~8–9% of oral category); strong volume gains (30–40%); promotional moderation. | Shipment up 44% to nearly 44 million cans; Helix reached profitability earlier than expected; on! PLUS expanding internationally. | Positive momentum; recognized as a key smoke-free growth driver. |
NJOY e-vapor device share and conversion rates | Strong share gains (up to 6.2% in Q3); encouraging repeat purchases; converting trial customers with ~50% retention post-promotion. | NJOY’s retail share of consumables 6.4%; no specific conversion data cited in Q4. | Steady share growth; continued focus on promoting trial. |
Smoke-free product portfolio growth | Cited robust growth in e-vapor (NJOY) and oral pouches (on!) as key pillars; repeated calls for better enforcement to balance the category. | Emphasized encouraging results from NJOY and on!; smoke-free alternatives now ~45% of total nicotine space; illicit market challenges threaten 2028 goals. | Sustained investments and positive performance; overshadowed by illicit concerns. |
Joint venture with Japan Tobacco for heated tobacco (Ploom) | Only briefly mentioned in Q3 with minimal details; no data in Q2 or Q1. | Progress on regulatory submissions; plan to file combined PMTA and MRTPA by mid-2025; sees Ploom as a key harm reduction opportunity. | Newer emphasis; potentially significant for future growth. |
Supply chain resilience for e-vapor products | Referenced strengthening NJOY supply chain expansion in Q2; no specific mention in Q1/Q3. | Alternative production facilities outside China mentioned to mitigate tariff impacts. | Moderate focus; sporadic updates on resilience. |
EPS growth guidance and profitability | 2024 EPS guidance reiterated ($5.07–$5.15); focusing on pricing, margin expansion in smokeable segment. | Guidance for 2025 EPS: $5.22–$5.37 (2–5% growth); 2024 adj. EPS up 3.4% full year; strong core income and margin expansions. | Stable projections; maintained cautious optimism. |
Consumer inflation pressures | Highlighted macroeconomic strain limiting discretionary income; fueling budget-conscious behavior. | Cumulative inflation driving downtrading and debt pressures; impacting lower-income smokers. | Continuing concern; remains a driver of discount shifts. |
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NJOY's Future and Patent Issues
Q: What are the options for NJOY amid patent issues?
A: Billy Gifford explained they are considering multiple pathways for NJOY due to patent disputes with JUUL. They are working on modifications to avoid patent infringement, including filing SE exemptions for three patents, and are "vigorously working" on the fourth. A settlement requires a "reasonable party," and they will be disciplined in their approach. Illegal disposable products dominate the market, influencing their considerations. -
EPS Guidance and NJOY Impact
Q: Does guidance account for potential NJOY withdrawal?
A: Salvatore Mancuso confirmed that their EPS guidance includes scenarios where NJOY ACE might be pulled from the market at the end of March. They provided a range to accommodate various outcomes and are confident about meeting their targets. -
Nicotine Pouches Growth
Q: Can on! maintain growth despite price increases?
A: Billy Gifford stated that on! resonates with consumers even with higher pricing. They improved promotional spending and met profitability targets ahead of time. They are awaiting authorization for on! PLUS to further engage consumers. -
Cigarette Market Share and Consumer Pressure
Q: Are cigarette share losses becoming a concern?
A: Gifford acknowledged that economic pressure leads consumers to downtrade, impacting market share. They aim to keep consumers with Marlboro by offering value. Illicit vape products are affecting cigarette sales. -
Regulatory Environment and FDA Enforcement
Q: What is expected from the FDA under the new administration?
A: Gifford hopes the FDA will function as intended by authorizing legal products and enforcing against illegal ones. He believes the regulatory system is "broken" and needs to improve. -
Synthetic Nicotine Market Entry
Q: Will Altria enter the synthetic nicotine market?
A: They have been evaluating this market, especially given the FDA's enforcement discretion. It's now "moved up on our radar". -
Impact of Potential Tariffs
Q: How would tariffs affect Altria's vaping business?
A: Gifford stated that tariffs on China would have limited impact as they use production facilities outside China. He declined to specify locations for competitive reasons. -
Controllable Costs in Smokeable Division
Q: Why did controllable costs spike in Q4?
A: Mancuso attributed the 13% increase to timing factors and emphasized disciplined resource allocation. They use data analytics for efficient spending. -
Consumer Trends in Convenience Channels
Q: What are you seeing in consumer spending trends?
A: Gifford noted that cumulative inflation continues to pressure their lower-income consumers. They are monitoring economic conditions. -
Manufacturing Locations and Tariff Mitigation
Q: Can you mitigate tariffs through production shifts?
A: Gifford confirmed they have facilities outside China, limiting tariff impact.