MO Expands Smokeable Margins to 64% as Cigarette Volumes Fall 9%

Altria Group, Inc.’s (MO) third-quarter of 2025 produced an unusual pairing in its smokeable business: cigarette shipments continued to shrink, yet profitability moved higher. After accounting for timing factors such as trade inventory adjustments and calendar shifts, domestic cigarette volumes were down roughly 9%, reflecting ongoing pressure on the combustible category. Even so, the smokeable segment’s adjusted margin climbed to 64.4%, extending its steady upward trend.

Price realization was the primary driver. Higher list prices offset the volume drag and helped lift adjusted operating income to $2,956 million for the quarter. This pricing strategy leans heavily on Marlboro’s stability in the premium tier, where it increased share to 59.6%, a 0.3-point gain from last year. A strong premium base gives the company room to take pricing without significant pushback from loyal adult smokers.

Margin expansion was also supported by lower per-unit settlement charges and careful control of operating expenses. These savings helped offset the effects of higher promotions and more smokers moving to discount brands. Altria’s data-focused pricing and product-mix strategies allowed it to maintain strong profitability by adjusting prices, managing mix and moderating promotions where needed.

Ultimately, the quarter highlights how Altria continues to extract more profit from fewer cigarette units. Through a combination of pricing power, premium-brand durability and operational efficiency, the smokeable segment delivered record margins despite clear and accelerating volume headwinds.

How MO Stacks Up Against PM and TPB

Philip Morris International Inc. (PM) delivered clear margin expansion in the third quarter of 2025 as pricing strength in combustibles and rapid scaling of smoke-free products offset cigarette volume declines. Primarily driven by high single-digit pricing and favorable market mix, Philip Morris reported combustible net revenue growth of 4.3% and gross profit growth of 7.7%. Even with a 3.2% decline in cigarette shipments, Philip Morris maintained a stable category share and increased Marlboro’s global share to its highest level since 2008.

Turning Point Brands, Inc. (TPB) posted strong profitability improvement in the third quarter of 2025, with gross profit rising 39.7% year over year to $70.4 million, supported by robust growth in its Stoker’s segment. Driven by accelerating Modern Oral adoption alongside steady MST and loose-leaf performance, Turning Point Brands reported an 80.8% surge in Stoker’s net sales, while segment gross margin expanded 440 basis points to 60.2%. This demonstrates Turning Point Brands’ ability to expand margins through favorable mix shift and strong category fundamentals.

Altria’s Price Performance, Valuation & Estimates

Shares of Altria have gained 0.7% in the past month against the industry’s decline of 1.6%.

From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 10.44X, down from the industry’s average of 13.83X.

The Zacks Consensus Estimate for MO’s 2025 earnings per share has inched up 1 cent in the past 30 days to $5.44, while the same for 2026 has slipped 1 cent to $5.56.

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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