8-K: Altria Reports Mixed 2023 Results, Announces New Share Repurchase Program and Executive Retirement

Altria's 2023 results show a mixed performance with a slight increase in adjusted EPS, a new $1 billion share repurchase program, and the retirement of its Executive Vice President and General Counsel.

Summary

• Altria reported its fourth-quarter and full-year 2023 results, showing a 2.3% increase in adjusted diluted EPS for the full year, reaching $4.95.
• The company's net revenues for the full year decreased by 2.4% to $24.5 billion.
• A new $1 billion share repurchase program was authorized, expected to be completed by December 31, 2024.
• Altria's 2024 full-year adjusted diluted EPS guidance is set between $5.00 and $5.15, representing a growth of 1% to 4%.
• The company completed the acquisition of NJOY Holdings, Inc. on June 1, 2023, and has expanded NJOY's distribution to 75,000 stores.
• Altria paid dividends of $6.8 billion for the full year 2023.
• The company's smoke-free volumes were essentially flat in 2023 compared to 2022, while total smoke-free net revenue reached $2.7 billion.
• Murray R. Garnick, Executive Vice President and General Counsel, announced his retirement effective April 1, 2024, to be succeeded by Robert A. McCarter.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the EPS growth, share repurchase program, and dividend payments. However, the decline in revenue and cigarette volumes, along with the executive retirement, temper the overall outlook.

Positives

• Altria achieved a 2.3% growth in adjusted diluted EPS for 2023.
• The company is returning capital to shareholders through a new $1 billion share repurchase program and $6.8 billion in dividends.
• NJOY's distribution has significantly expanded, reaching 75,000 stores.
• Altria maintained its leadership position in the U.S. tobacco market.
• The company met its 2030 environmental targets by the end of 2023.
• The adjusted OCI margin was 60.3% for 2023, exceeding the 60% target.

Negatives

• Net revenues decreased by 2.4% for the full year 2023.
• Smokeable product shipment volumes decreased by 9.9% for cigarettes and 1.4% for cigars in the fourth quarter.
• Smoke-free volumes were essentially flat in 2023 compared to 2022.
• Marlboro's retail share decreased by 0.4 share points for the full year.
• Oral tobacco products segment retail share decreased by 3.7 percentage points for the full year.
• The company's debt-to-EBITDA ratio was 2.2x, slightly above the target of 2.0x.

Risks

• The company faces challenges from the decline in cigarette consumption and the growth of illicit e-vapor products.
• Macroeconomic pressures on adult tobacco consumer disposable income could impact sales.
• Regulatory, litigation, and legislative developments pose ongoing risks.
• The company's ability to successfully commercialize innovative smoke-free products is crucial for future growth.
• The external environment remains dynamic, with potential impacts from the economy, consumer behavior, and regulatory actions.

Future Outlook

Altria expects to deliver 2024 full-year adjusted diluted EPS in a range of $5.00 to $5.15, representing a growth rate of 1% to 4%. The company anticipates that growth will be weighted towards the second half of the year. They also plan to continue strategic investments in smoke-free products and research.

Management Comments

• Billy Gifford, Altria's Chief Executive Officer, stated that 2023 was a pivotal year with significant progress in enhancing the smoke-free product portfolio.
• Billy Gifford also noted that the company grew adjusted diluted EPS by 2.3% and delivered nearly $7.8 billion in dividends and share repurchases.
• Gifford expressed gratitude for Murray Garnick's contributions and wished him well in retirement.

Industry Context

Altria's results reflect the ongoing challenges in the tobacco industry, including declining cigarette consumption and the rise of alternative products. The company's focus on smoke-free products and strategic investments aligns with the broader industry trend of transitioning away from traditional cigarettes. The expansion of NJOY's distribution is a key move in this direction, as is the focus on international markets and non-nicotine categories.

Comparison to Industry Standards

• Altria's adjusted EPS growth of 2.3% is moderate compared to some high-growth sectors but is within the range of expectations for mature consumer staples companies.
• The company's focus on smoke-free products mirrors the strategies of competitors like Philip Morris International, which is also heavily invested in reduced-risk products.
• The debt-to-EBITDA ratio of 2.2x is slightly above the target of 2.0x, which may be a concern for some investors, but is not unusual for companies in this sector.
• The decline in cigarette shipment volumes is consistent with industry trends, as consumers shift towards alternatives.
• The expansion of NJOY's distribution to 75,000 stores is a significant step, but its retail share of 3.7% indicates there is still room for growth compared to established e-vapor brands.

Management Changes

Stakeholder Impact

• Shareholders will benefit from the share repurchase program and dividend payments.
• Employees may be impacted by the executive leadership change.
• Customers will see continued investment in smoke-free products.
• Suppliers and creditors will be affected by the company's financial performance and strategic direction.

Next Steps

• Altria plans to complete the new $1 billion share repurchase program by December 31, 2024.
• The company will continue to monitor market conditions and make strategic investments in smoke-free products.
• Altria expects to provide updates on its progress in international innovative smoke-free markets and non-nicotine categories at CAGNY.
• The company will announce new environmental targets in the coming months.

Key Dates

Keywords

Altria, tobacco, share repurchase, dividends, NJOY, smoke-free, EPS, Marlboro, oral tobacco, litigation, regulation