Will Strong Pricing Power Offset Altria's Volume Declines in 2025?

Altria Group, Inc.’s MO focus on pricing strength remains central to its strategy for managing persistent cigarette volume declines. In the second quarter of 2025, domestic cigarette shipment volumes in the smokeable products segment fell 10.2% year over year. Yet, adjusted operating companies' income for the segment rose 4.2%, with margins expanding to 64.5%, supported by a solid 10% increase in net price realization during the period.

This ability to raise prices even as volumes shrink has long been a hallmark of Altria’s model. Marlboro, which expanded its premium segment share to 59.5%, remains the cornerstone of this strategy, providing brand strength that supports above-inflation price increases and underpins the company’s pricing power.

Still, cigarette consumption is under sustained pressure. The cigarette industry’s discount retail share reached 31.2% in the second quarter, up 1.9 percentage points from a year earlier, reflecting continued discretionary income strain among adult tobacco consumers. To mitigate downtrading risks, Altria is selectively expanding its Basic discount brand into about 30,000 targeted stores, aiming to keep value-oriented smokers within its portfolio.

The company’s ability to use pricing gains to counter declining volumes remains central to its performance in 2025. Management now expects adjusted earnings per share to range between $5.35 and $5.45, raising the lower end of prior guidance. This outlook reflects confidence that premium pricing power can help offset persistent industry volume declines. However, maintaining this balance will depend on how effectively Altria can sustain its pricing strategy amid ongoing category contraction and increasing consumer trade-down.

MO’s Competitor Comparison: Pricing Power in Focus

Philip Morris International Inc. PM continues to demonstrate that pricing power remains a central engine of its profitability. In the second quarter of 2025, Philip Morris delivered organic net revenue growth of 6.8% (more than 8% excluding the Indonesia technical impact) and organic adjusted operating income growth of 14.9%. Notably, Philip Morris’ pricing contributed 5.2 points to net revenue growth, driven by an increase in combustible pricing and low single-digit pricing gains in smoke-free products excluding devices.

Turning Point Brands, Inc. TPB emphasizes brand strength and market positioning over aggressive pricing. In the first quarter of 2025, Turning Point Brands saw volume resilience in its Stoker’s portfolio, supported by consumer trade-down trends. Meanwhile, the company’s modern oral business focuses more on strategic brand building and distribution expansion than on price-driven growth. Turning Point Brands continues to invest heavily in marketing, retail partnerships and distribution, while margin performance remains influenced by product mix shifts and input cost pressures, including tariffs.

MO’s Price Performance, Valuation & Estimates

Shares of Altria have gained 5.7% in the past month against the industry’s decline of 1%.

From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 11.26X, down from the industry’s average of 14.66X.

The Zacks Consensus Estimate for MO’s 2025 and 2026 earnings implies year-over-year growth of 4.9% and 3.1%, respectively.

Altria currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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