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Altria Group, Inc. (MO - Free Report) is likely to register top-and-bottom-line growth when it reports second-quarter 2023 earnings on Aug 1.

The Zacks Consensus Estimate for revenues is pegged at $5,447 million, suggesting 1.4% growth from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for the bottom line has dropped by a penny to $1.31 per share over the past 30 days. The projection indicates an increase of nearly 4% from the figure reported in the year-ago period quarter. Altria Group has a trailing four-quarter negative earnings surprise of 0.6%, on average.
 

Factors to Consider

Altria Group has been benefiting from its strong pricing power, which has helped the company stay firm, even amid soft cigarette shipment volumes. Though higher pricing might lead to a possible decline in cigarette consumption, it is seen that smokers tend to absorb price increases due to the addictive quality of cigarettes.

In the first quarter of 2023, higher pricing offered respite to revenues across the Smokeable Products and Oral Tobacco categories, which were otherwise hurt by lower volumes. Higher pricing aided the adjusted operating companies' income (OCI) in both segments. The continuation of such trends is likely to have remained an upside.
 

Altria Group, Inc. Price, Consensus, and EPS Surprise

Altria Group, Inc. price-consensus-eps-surprise-chart | Altria Group, Inc. Quote

With reduced-risk products (RRPs) gaining popularity, Altria Group has been offering several oral tobacco, e-vapor, and heated tobacco products. To this end, on! is a worthwhile addition to the company’s smokeless portfolio as oral TDN products are gaining popularity in the United States due to their low-risk claims. Management continues to expand the manufacturing capacity and the commercial availability of the product.

Net revenues in the Oral Tobacco Products segment rose 2.4% from the year-ago quarter’s level to $628 million in the first quarter of 2023. The upside can be attributed to improved pricing.

In the first quarter, on! reported shipment volumes grew 38% to 25.2 million cans. on! saw its share of the total oral tobacco category increase by 2.4 share points to 6.5% in the quarter. These upsides bode well for the quarter under review. The Zacks Consensus Estimate for second-quarter Oral Tobacco Products revenues is pegged at $665 million, in line with the figure reported in the year-ago period.

However, soft Smokeable Products volumes have been a concern. In the first quarter, domestic cigarette shipment volumes decreased by 11.4%, mainly due to the industry’s decline rate, retail share losses, and trade inventory movements, partly countered by calendar differences. The industry’s decline and retail share losses were a result of macroeconomic pressure on Adult Tobacco Consumers’ disposable income.

On its first-quarter earnings call, management stated that consumers’ discretionary income remained pressurized due to a rise in overall inflation. Increased inflation has been causing consumers to alter their buying patterns, which has been weighing on cigarette industry volumes since the second quarter of 2022.

The company plans to continue assessing these aspects and their impacts on tobacco consumers throughout this year, per the last earnings call. Cigarette volumes, in general, have been affected by consumers’ rising health consciousness and a shift to low-risk tobacco alternatives. The Zacks Consensus Estimate for second-quarter Smokeable Products revenues is pegged at $5,894 million compared with $5,873 million reported in the year-ago period.

Apart from this, management’s bottom-line view for 2023 takes into account planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free product research, development, and marketplace activities to support the company’s smoke-free products. These factors may have affected the bottom line in the second quarter.
 

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Altria Group this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat, which is not the case here.

Altria Group has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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