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Revenue per Smokeable Product: We currently estimate revenue per smokeable product unit to increase by ~20% over the course of the Trefis forecast period, which would suffice to offset the current cigarettes industry volume decline. However, it is also possible that the annual increase in revenue per cigarette is lower than expected due to a lower room for higher pricing. A 1% annual rate of increase would imply a 9% downside to the Trefis price estimate.
Altria Group, Inc. (previously named Philip Morris Companies Inc.) is one the largest tobacco corporations in the world and the parent company of Philip Morris USA, John Middleton Inc., United States Smokeless Tobacco Inc., Philip Morris Capital Corporation, and Chateau Ste. Michelle Wine Estates. The company formerly owned Kraft Foods (KFT) and Philip Morris International (PM), which housed its international tobacco business. In January 2009, Altria Group completed the acquisition of UST Inc., a moist smokeless tobacco manufacturer, and owner of the Chateau Ste. Michelle Wine Estates. In addition, proceeding the combination of Anheuser-Busch InBev and SABMiller, Altria attained a 10.2% ownership in the entity.
The brand portfolios of Altria’s tobacco operating companies include well-known names such as Marlboro, Copenhagen, Skoal, and Black & Mild. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle and Columbia Crest. It exclusively distributes and markets Antinori, Champagne Nicolas Feuillatte, and Villa Maria Estate products in the United States.
Cigarettes and cigars are the most valuable division of Altria Group with about 70% contribution to its stock value. Philip Morris USA occupies more than 50% retail share in the US cigarettes market. It sold 109.8 billion cigarettes in 2018, with Marlboro being the most popular cigarette brand occupying a giant retail share of 43.1% by itself.
Smokeless products is a high growth niche segment of tobacco products in the US and is projected to grow at an annual rate of around 6% to 10% over the next few years. Altria currently occupies more than 50.6% of the market share in the US in terms of volume of sales with its leading smokeless tobacco brands which include Copenhagen, and Skoal.
The volume of tobacco products sales has been declining as a result of growing health consciousness among people about the extreme health risks of smoking. Federal and state governments in the U.S. have also been discouraging tobacco consumption through high excise duties and legislative controls like bans on public smoking and strict restrictions on advertising and marketing of tobacco products as well as compulsory health warnings. The volume of cigarette sales is expected to decline by close to 4% each year over the next five years.
US federal, state, and local governments, tax tobacco products for both revenue and public health purposes. High excise duties lead to increases in cigarette prices which also discourage cigarette smoking.
A development that dampened the results for the company in 2017 and 2018 was the tax hike in California. Since California is a high volume state, it will negatively impact the revenues for the company. Furthermore, there are also proposals in several other states to raise the excise taxes further.
Governments also resort to anti-tobacco legislation and anti-smoking laws to discourage tobacco and cigarette consumption. Legislation such as those banning smoking in public places leads to a reduction in cigarette sales. Family Smoking Prevention and Tobacco Control Act, 2009 also gave the US Food & Drug Administration (FDA) the authority to regulate the tobacco industry, which may lead to greater restrictions on tobacco products. The FDA can limit what goes into tobacco products. For instance, in 2010 the organization enforced a ban on the use of strawberry, vanilla, chocolate, clove, and other such flavors in cigarettes and required the ingredients to be publicized as well as limited marketing, especially to young people. There is also a risk of ban or restrictions on menthol cigarettes that currently comprise almost 30% of cigarette sales.
Most tobacco and cigarette businesses today follow a Price-Profit First Strategy and enjoy a significant room for strong net pricing and margin expansion. Despite declining cigarette sales, revenues and profit margins are maintained through higher pricing.
The tobacco industry is highly susceptible to adverse litigation. Apart from the likely enormous damage payments, the negative publicity generated by such large and high profile court cases also hurt tobacco products' demand. Due to its large size and market share, Altria is more susceptible to such litigation risks.
We believe there may be a good opportunity with Altria stock (NYSE: MO) at the present time. MO trades at $39 currently and is in fact down 16% so far this year. It traded at a pre-Covid high of close to $44 in February, and is still 11% below that level now. ...More
Altria stock (NYSE: MO) increased around 36% since the late March lows (vs. about 44% for S&P 500) to its current level of $43. This is after falling to a low of $31 on 23rd March, as a rapid increase in the number of Covid-19 cases spooked investors, and heightened concerns of an imminent global economic downturn. ...More
Altria (NYSE:MO) stock lost more than 35% this year, declining from $49 to $31. However, it then increased by nearly 25%, from $31 to a little over $39 (as of July 6, 2020). This means that it is almost 20% below where it started this year. ...More
Altria stock (NYSE: MO) price has decreased by about 29% in the last three and a half years, when the stock dropped from $56 at the end of 2016 to around $40 as of 25th June 2020. That’s bad news for Altria. ...More
Altria’s stock (NYSE: MO) lost about 32% of its value in the last 3 years, with the stock price dropping from $56 at the end of 2016 to $38 as of 18th May 2020. What’s surprising is that during the same period, Altria’s revenues remained almost stable. ...More
Despite an 18% decline in Altria’s (NYSE: MO) stock since the beginning of this year as the spread of the novel Coronavirus rattled the stock markets and the broader economy, at the current price of $40 per share, we believe Altria has a significant downside if there are no signs of abatement of the crisis in May 2020. ...More
Comparing the trend in Altria Inc. (NYSE: MO) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 40% once fears surrounding the coronavirus outbreak are abated. ...More
Altria (NYSE: MO) saw its stock price plummet by almost 40% over the last 3 years, from $74 in February 2017 to about $45 in February 2020. This drop was primarily driven by a complete washout of profitability in 2019, with the company reporting losses in 2019, led by a surge in impairment charges. ...More
Altria (NYSE: MO) is slated to release its Q4 and full-year 2019 results on January 30, 2020. Trefis details expectations from the Tobacco giant in an interactive dashboard – Altria’s Pre-Earnings – parts of which are highlighted below. ...More
Altria’s (NYSE: MO) total expenses have trended steadily higher from around $11.5 billion in 2016 to about $18.4 billion in 2018. As a percentage of revenues, expenses have increased from 45% to 73% during the same period. The company's expenses are largely driven by excise taxes and cost of sales. ...More
Altria (NYSE: MO) made a substantial loss of $2.6 billion in Q3 2019 against a net profit of $2 billion in Q2 2019 and $1.9 billion in Q3 2018. This marks a sequential decline of a whopping 230% in net income during the third quarter compared to Q2 2019. The primary reason for such a drastic fall in profits is the $4. ...More
After Philip Morris (NYSE: PM) was spun off from Altria (NYSE: MO) in 2008, it has successfully grown its business at a much faster rate than its former parent. Though both companies offer similar products, what distinguishes them is the size and geographic presence. ...More
Altria (NYSE: MO) is set to release its Q2 2019 earnings report on July 30, 2019, followed by a conference call with analysts. Key Expectations Altria Revenues have been decreasing over the last three quarters due to the decline in the sales of cigarettes. ...More
Altria (NYSE: MO) is betting heavily on the rising demand for smokeless or heated tobacco products to drive its overall revenue and profitability in the medium term. This is evident from the company’s recent initiatives of investing significant resources in expanding its e-vapor footprint through organic as well as inorganic strategic decisions. ...More
Altria Group Inc. (NYSE: MO) released its Q1 2019 financial results recently, followed by a conference call with analysts. The company reported net revenue of $4.39 billion in Q1 2019, marking a decline of 6% from $4.67 billion in Q1 2018. On a sequential basis, net revenue decreased by 8.3% from Q4 2018. ...More
Altria Group Inc (NYSE: MO) is set to announce its Q1 2019 results on April 25, 2019, followed by a conference call with analysts. We expect the company to report net revenue of $4.61 billion in Q1 2019, which marks a decline of 1.3% compared to $4.67 billion in Q1 2018. On a sequential basis, net revenue is expected to decline by 3.7%. ...More
Cronos group, a vertically integrated Canadian marijuana company, has seen its stock price rise close to 3x over the last year, driven by the legalization of recreational pot in Canada and also by a $1.8 billion investment from Marlboro cigarette maker Altria group. ...More
Cronos Group, a vertically integrated Canadian marijuana producer, published its Q4 and full year 2018 results on Tuesday, missing market and Trefis expectations. While the company’s quarterly revenues rose by close to 250% year-over-year to CAD 5.6 million ($4. ...More
Namaste Technologies' (CVE:N) stock has tanked of late, after the company announced that CEO Sean Dollinger had been terminated for cause after an internal investigation found "evidence of self-dealing" and "breaches of fiduciary duty. ...More
Cannabis company Cronos Group is expected to publish its Q4 2018 results in the coming weeks. The company’s stock has fared well following its last earnings report, rising from around $8 in mid-November to close to $19 currently, driven by a $1. ...More