Altria's Oral Margins Surge to 68.7%: Can the Strength Last?

Altria Group, Inc.’s (MO) oral tobacco business is showing solid profitability, with adjusted operating companies income (“OCI”) margins rising to 68.7% in the second quarter of 2025, up 3.1 percentage points from a year earlier. This surge underscores the segment’s strong cost discipline and favorable pricing, even as total shipment volumes dipped 1%.

The standout driver remains on! nicotine pouches, which posted a 26.5% volume increase and offset weakness in traditional moist smokeless tobacco (“MST”) brands like Copenhagen and Skoal. Strong pricing and cost efficiencies lifted adjusted OCI by 10.9%.

Sustaining the segment’s strong profitability will depend on its product mix. Growth is increasingly driven by on!, which has a different margin profile than traditional MST products. Competition in the nicotine pouch category also remains intense. on!’s share of the pouch segment declined 2.3 percentage points year over year to 16.7%, even as its share of the total U.S. oral tobacco category inched up to 8.7%.

For now, Altria’s oral tobacco business continues to demonstrate strong operating efficiency despite softer shipment trends. The recent margin improvement reflects pricing discipline and cost control. Whether current profitability levels can be maintained over time will depend on future pricing dynamics, competitive pressures and the cost structure of its growing smoke-free portfolio.

How PM & TPB Compare to Altria’s Oral Segment Margins

Philip Morris International Inc. (PM) posted an adjusted operating income margin of 41.9% in the second quarter of 2025, reflecting the success of its global pricing and cost management strategies. Strong performance of Philip Morris is notable given the substantial marketing and R&D investments supporting its Smoke-Free Business and leading U.S. nicotine pouch brand, ZYN. These results underscore Philip Morris’ ability to drive profitability while expanding its multi-category platform worldwide.

Turning Point Brands, Inc. (TPB) reported a Stoker's products segment adjusted operating income margin of 44.3%, up 250 basis points in the second quarter of 2025, along with a gross margin of 62.5%. Strong performance of Turning Point Brands reflects its manufacturing efficiency and robust pricing power across high-margin consumable products. These results underscore Turning Point Brands’ ability to capitalize on the rapidly expanding modern oral market.

Altria’s Price Performance, Valuation & Estimates

Shares of Altria have gained 2.5% in the past month against the industry’s decline of 1.8%.

From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 12.02X, down from the industry’s average of 14.68X.

The Zacks Consensus Estimate for MO’s 2025 and 2026 earnings implies year-over-year growth of 6.1% and 2.5%, respectively.

Altria currently carries a Zacks Rank #2 (Buy). 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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