Altria: Business Update

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NJOY Acquisition & FY23 Guidance Update

Altria completed the acquisition of NJOY and updated FY23 EPS guidance in connection with this acquisition (i.e. as a result of the planned investments behind the US commercialization of NJOY ACE)1

–  Identified a total of ~70,000 US retail stores for the initial NJOY ACE expansion phase. This represent ~70% of e-vapor volume and 55% of cigarette volume in the US multi-outlet and c-store channel

– Financial results for NJOY to be reported within the “All Other”category as of Q2 2023

– Expects the Transaction to be cash flow accretive in 2025 and EPS accretive in 2026. Also expects the return on invested capital to exceed the current WACC by 2027

As a result of the Transaction, FY23 EPS guidance is reduced by $0.09-$0.10 (~2%)

–  New guidance: EPS in a range of $4.89-$5.03, representing a growth rate of 1%-4% from a base of $4.84 in 2022

– Old guidance: EPS in a range of $4.98-$5.13, representing a growth rate of 3%-6%

Our takeaway

Altria’s financial return expectations from Strategic Transactions has proven to be overly optimistic in the past (e.g. JUUL, Cronos). Thereby, we take the “expectations from the NJOY acquisition” with a pinch of salt. Moreover, we expect the Altria’s future earnings growth to be negatively impacted by further “RRP catch-up investment”.

References:

  1. https://investor.altria.com/press-releases/news-details/2023/Altria-Completes-Acquisition-of-NJOY-Holdings-Inc.-Updates-2023-Full-Year-Earnings-Guidance/default.aspx ↩︎

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