Altria: Investor Day

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2023-2028: 5-year Guidance1

– Mid-single digit annual EPS growth (in line with the 5% EPS growth posted in 2022, but significantly lower than the 8.8% annual EPS growth achieved in the 2016-2021 period)

– OCI margin of at least 60%

– New progressive dividend goal: mid-single digit annual dividend growth (previously, targeting a dividend payout of ~80% of adjusted EPS)

– A capital structure with a Debt/EBITDA ratio of ~2.0x

Altria sets its first-ever sales target for smokeless products

– Volume: at least 35% growth from the 2022 base of 800 million units (including traditional oral tobacco)

– Net revenue: approximately double to $5 billion, of which $2 billion to be from innovative smoke-free products (vapes, modern oral tobacco, heated tobacco)

Altria introduces its Heated Tobacco product: SWIC

– Proprietary technology: tobacco filled capsules heated to deliver a satisfying inhale

– Each capsule is single use and lasts for one use

– Features a simple and intuitive user experience

Long-term Growth Opportunities:

– International smoke-free and non-nicotine (such as cannabis products or caffeine pouches) represent multi-billion dollar opportunities

– Strategy development ongoing

Our takeaway

Altria closed at $43.46 on the Investor Day: that is to say, 44% below its ATH ($77.79, June 2017). In FY2022, Altria delivered $4.84 adj. EPS: that is to say, 32% more than FY2017 adj. EPS ($3.39). The divergence between the share price development and the earnings growth (i.e. multiple compression) well demonstrates the loss of confidence in Altria and its future.

Based on the Investor Day remarks, it is fair to claim that Altria is finally talking about the things investors want to hear. The alignment with the market seems to be in place in terms of what Altria needs to focus on and improve. However, the intentions & plans are not enough: some “early wins” are needed to start re-building the confidence lost.


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