Will Altria's Smoke-Free Bets Deliver Long-Term Revenue Lift?

Altria Group, Inc. MO is doubling down on its shift to a smoke-free future, but the critical question is whether this strategic pivot can deliver sustained long-term revenue growth. In the first quarter of 2025, the company’s oral tobacco portfolio — anchored by its on! nicotine pouch brand — continued to gain traction. Shipment volumes for on! increased 18% year over year to over 39 million cans. Notably, its market share in the oral tobacco category expanded by 1.8 percentage points to 8.8%, while its share of the nicotine pouch market rose to 17.9%. These gains came despite retail price hikes, reflecting both strong consumer loyalty and brand strength.

This momentum helped drive a modest 0.5% increase in Oral Tobacco Products revenues to $654 million in the first quarter, largely attributed to pricing power. While the growth rate may seem tepid, the ability to grow revenues amid volume pressure and macroeconomic uncertainty signals strong underlying fundamentals.

On the vapor front, Altria faces tougher terrain. Regulatory setbacks have forced the discontinuation of NJOY ACE, its flagship e-vapor product. However, the company plans to launch new, compliant alternatives. If successful, the revamped NJOY lineup could help recapture vapor market share.

Long-term success hinges on Altria’s ability to scale its reduced-risk portfolio (RRPs) while navigating regulatory headwinds. If it can maintain pricing power, expand distribution and deliver innovation across smoke-free platforms, its transformation may indeed support a durable revenue lift — even as traditional cigarette volumes continue to decline.

MO’s Competition in the Smoke-Free Category

Philip Morris International Inc. PM and British American Tobacco p.l.c. BTI are the key tobacco companies competing with Altria in the smoke-free category.

Philip Morris is accelerating its shift toward RRPs, with smoke-free offerings contributing 44% of first-quarter 2025 gross profit. Driven by IQOS, ZYN and VEEV, it saw strong volume growth, a 20.4% rise in net revenues and a 33.1% increase in smoke-free gross profit. ZYN shipments rallied 53% in the United States, while VEEV volumes more than doubled in Europe. With products in 95 markets and 38.6 million users, Philip Morris is advancing toward a smoke-free future.

British American Tobacco is reshaping its business around RRPs, targeting 50 million consumers by 2030 and aiming for a 50% revenue contribution by 2035. In 2024, its smokeless user base reached 29.1 million, with New Category revenues up 2.5%. British American Tobacco’s flagship brands — Vuse, glo and Velo — have collectively driven over £3 billion in revenues, reflecting its progress toward a smoke-free future.

MO’s Price Performance, Valuation & Estimates

Shares of Altria have gained 12.5% year to date compared with the industry’s growth of 37.7%.

From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 10.76X, below the industry’s average of 15.36X.

The Zacks Consensus Estimate for MO’s 2025 earnings implies year-over-year growth of 4.9%, whereas its 2026 earnings estimate suggests a year-over-year uptick of 3.3%. The estimates for 2025 and 2026 have moved up in the past 30 days.

MO stock 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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