Altria Bets on Pricing: A Cushion Against Falling Volumes?

Altria Group, Inc. (MO) is currently leaning on its pricing strategy to counter the ongoing decline in cigarette volumes, a persistent challenge in the tobacco industry. The company's second quarter of 2025 results show a significant 10.2% drop in domestic cigarette shipment volume for its smokeable products segment, indicating both the broader industry decline and rising competition from flavored disposable e-vapor products. For the first half, domestic cigarette shipment volume declined 11.9%.

Yet, despite these substantial volume headwinds, the smokeable products segment’s adjusted operating companies income (“OCI”) improved 4.2% for the second quarter and 3.5% for the first half. This seemingly contradictory performance is explained by Altria's strong net price realization, which was an impressive 10% for the quarter and 10.4% for the first half. This ability to consistently raise prices effectively in a declining market indicates a significant degree of brand loyalty among existing consumers and a strategic focus on maximizing revenues from each unit sold.

Altria's use of this pricing power appears to be a direct response to the shrinking demand, helping it address financial health and profitability in a challenging industry. This approach can offer a notable means for the company to support its core business as market dynamics continue to evolve.

Altria's Peer Check

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’ performance was driven by higher combustible pricing and modest smoke-free gains.

Meanwhile, Turning Point Brands, Inc. (TPB) is strategically shifting its focus toward high-growth product categories. In the second quarter of 2025, Turning Point Brands' Modern Oral nicotine pouch revenues increased nearly eightfold year over year. The company is making significant investments in sales and marketing to expand distribution for its FRE and ALP brands. Turning Point Brands is also investing in its sales force to support expansion plans.

MO’s Price Performance, Valuation & Estimates

Shares of Altria have gained 13.3% in the past month compared with the industry’s growth of 8.6%.

From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 12.33X, down from the industry’s average of 15.78X.

The Zacks Consensus Estimate for MO’s 2025 and 2026 earnings per share has inched up by 2 cents each in the past 30 days to $5.39 and $5.55, 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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