Marlboro maker Altria (MO) earnings Q3 2023

Altria Group, the parent company of Philip Morris USA and the nation’s largest tobacco company, reported third-quarter results Thursday that fell short of Wall Street’s expectations as demand for its core cigarette business cools and illicit e-vapor products flood the market.

Here’s how the company did, compared to the consensus among analysts surveyed by LSEG, formerly known as Refinitiv:

• Earnings per share: $1.28 adjusted vs. $1.29 expected
• Revenue: $5.28 billion adjusted vs. $5.43 billion expected

Altria’s overall revenue fell in its third quarter, decreasing 4.1% year over year to $6.28 billion. Net of excise tax, the company recorded revenue of $5.28 billion, down 2.5%. The company said the drop was in part due to lower net revenues for its smokeable products.

Net earnings for the period were $2.17 billion, or $1.22 per share, compared with $224 million, or 12 cents per share, a year earlier. Adjusting for one-time items associated with the company’s investment in Anheuser-Busch InBev as well as litigation and acquisition costs, Altria earned $1.28 per share.

The company narrowed its guidance for 2023 full-year adjusted EPS to a range of $4.91 to $4.98, or a growth rate of 1.5% to 3% from adjusted EPS of $4.84 in the prior year.

The Marlboro maker said its domestic cigarette shipment volume decreased 11.6%, primarily driven by wider declines across the industry and competition from illicit e-vapor products, among other factors.

In a conference call with analysts, Altria CEO Billy Gifford said the lack of regulation of illicit e-vapor products has come at the expense of legal operators and approved. It said enforcement by the FDA has been “inadequate and ineffective.”

Although federal crackdowns have placed more restrictions on the flavors and marketing for tobacco products, illicit operators are skirting many tobacco-related laws and are flooding the market with disposable e-cigarettes that aren’t FDA-approved and are illegal to sell.

In June, Altria completed its acquisition of NJOY’s e-vapor product portfolio for approximately $2.75 billion. The deal included the product NJOY ACE, the only pod-based vape cleared for the U.S. market by the FDA.

The company said it expects ACE distribution to reach a total of 70,000 stores by the end of the year.

So far this year, Altria has recorded pre-tax charges of $424 million for tobacco litigation, including the settlement of JUUL-related litigation. In May, Altria settled at least 6,000 lawsuits accusing it of fueling a teen vaping epidemic through its former investment in Juul.

Gifford said the company’s traditional tobacco business was nevertheless “resilient in a dynamic operating environment.”

“I believe we have the appropriate strategies and people in place to execute our growth plans. I continue to believe that we can achieve our vision and create long-term value for our shareholders,” Gifford said in a statement.

Like many other tobacco companies, Altria is moving beyond traditional, combustible cigarettes and towards smoke-free products.