February 2026: Fitch Upgrades Altria to BBB+
Fitch Ratings upgraded Altria’s Long-Term Issuer Default Rating (IDR) to “BBB+” from “BBB” and Short-Term IDR to “F1” from “F2”. Additionally, Fitch removed Altria’s ratings from Under Criteria Observation (UCO). Fitch previously placed Altria’s ratings on UCO following the publication of its “Corporate Rating Criteria” in January 2026. The Rating Outlook is Stable. The upgrade reflects Fitch’s view that Altria’s leading U.S. cigarette market position, conservative leverage profile, and ability to generate consistently strong profitability and cash flows, despite ongoing cigarette secular headwinds and U.S. market regulatory challenges, support a “BBB+” rating profile. Fitch expects Altria to maintain a consistent capital allocation framework that balances shareholders returns, reflecting mid-single-digit dividend growth and share repurchases in the $1 billion range annually, while sustaining EBITDA leverage around 2x.
Key Rating Drivers
– Strong Financial Profile Amid Market Challenges: Altria has a proven track record of offsetting long-term secular volume declines with consistent pricing power. U.S. tobacco volumes of combustible, oral tobacco and e-vapor, excluding illicit usage, have declined in the low single digits annually over the last several years, with cigarette category declines in the high single digits. Despite this, Altria has been able to achieve strong price realization, supporting a relatively stable top line profile of around $20 billion annually.
The company generated Fitch-adjusted EBITDA of $12.5 billion with EBITDA margins near 62% in 2025, up from $11.9 billion and around 58.5% in 2024, and markedly higher than pre-2019 levels of below $10 billion and 50%, respectively. This reflects benefits of pricing, mix, cost management and operating efficiencies. This has translated into robust FCF generation in the $1 billion – $2 billion range annually over the last five years and is projected to sustain at close to $1 billion over the medium term.
– Slow U.S. Transition to Smoke-freee products: Altria and other U.S. manufacturers have made little progress in realizing top line momentum from the transition towards smoke-free products compared to international peers due to the U.S. regulatory environment and enforcement challenges for illegal e-vapor products. Despite the slower shift, Altria’s commitment and investments towards smoke-free alternatives, combined with its leading position and expertise in the U.S. market would position the company well should regulatory conditions improve and transitions accelerate.
Altria’s top line contribution from its innovative products, such as on!, is relatively small in the low single digits. The company’s innovation has seen progress over time, with FDA approvals received for six on! PLUS nicotine pouch products in December 2025 and other submissions awaiting approval in the pipeline. The exclusion order banning NJOY importation remains a setback expected through 2026, until a reworked e-vapor product returns to the market.
– Leading Tobacco Market Share: Altria’s smokable portfolio is anchored by its Marlboro franchise, the leading U.S. cigarette brand. Marlboro commands strong brand loyalty and holds close to 60% share of the premium segment, steadily gaining premium share in the last few years. Its smokable portfolio captures roughly half of the U.S. market and generates more than 85% of Altria’s operating income.
– Conservative Financial Policy: Fitch expects Altria’s EBITDA leverage to remain stable at around 2x. The company’s capital allocation policy targets gross leverage of 2.0x, mid-single digit annual dividend per share growth, and mid-single-digit adjusted diluted earnings per share growth. Fitch views Altria’s commitment and adherence to its leverage target as supportive of its credit profile amid ongoing tobacco market challenges.
– Heightened Competitive Landscape: As portfolio migration occurs, Altria will need to generate adequate top-line growth against other competition to see meaningful top line momentum. Philip Morris International (PMI) derived 41.5% of its 2025 global net revenue from smoke-free products and its brand, ZYN, holds a dominant share in the U.S. oral nicotine pouch market, with ZYN Ultra currently pending FDA approval. PMI is also awaiting approval for its IQOS ILUMA device and plans a major U.S. launch once authorized. This could raise competitive intensity over time.
– Near-Term Consumer Challenges: Persistent inflation and moderating savings have affected consumer health, particularly for middle- to lower-income households, leading to increased downtrading, and retail share gains in discount tobacco over the past few years. Fitch anticipates consumers will remain under pressure in the current environment and expects the company to use revenue growth management tools and the Marlboro Black and repositioned Basic brands to manage price gaps and mitigate negative effects.
– Early-Stage International Expansion: Altria is expanding its smoke-free portfolio internationally to tap markets with fewer regulatory limitations compared the U.S. Its on!, on! PLUS, and FUMi brands are available in select international markets. The strategic partnership with KT&G is expected to enhance import/export activities and require modestly higher capex investments in 2026. Successful execution of these growth efforts could support Altria’s longer term growth trajectory, although it is likely to be a small contributor near term.
– ABI Stake Supports Profile: Fitch believes Altria’s 8.1% ownership in Anheuser-Busch InBev (ABI), with a fair value of close to $12.9 billion supports the company’s overall financial flexibility. Proceeds from share sales could be used for business investments and shift towards smoke-free products. However, it could become a rating concern if Altria uses proceeds solely for shareholder returns. In 2024, Altria sold about 38 million ABI shares and applied $2.4 billion of proceeds to accelerated repurchases.
Peer Analysis
Altria’s comparable peers include Philip Morris International (PMI; A/Stable), British American Tobacco (BAT; BBB+/Stable, UCO) and Imperial Brands (IMB; BBB/Stable). PMI’s ratings are anchored in its market and price leadership in the global tobacco industry (excluding the U.S. and China), supported by a diverse portfolio of leading tobacco brands in the countries it operates in. PMI has large market shares and pricing leadership in many profitable tobacco markets. PMI is the global leader in next generation, reduced-risk products and is the leading manufacturer in the heated tobacco segment.
BAT’s rating reflects its strong business profile as one of the largest global tobacco companies in a fairly consolidated sector, with wide regional and brand diversification. BAT’s broad next generation products (NGP) portfolio and exposure to a wide range of mature, cash-generating and emerging markets offer good growth potential. The credit profile remains supported by BAT’s conservative financial policy with a commitment to a target leverage range, which provides good headroom under the “BBB+” rating
IMB’s rating reflects its focus on cash-generative and profitable, but mature, combustible tobacco markets. These continue to have structurally declining volumes, but the company benefits from price increases and market share progress in the growing NGP category, albeit from a low base. It also reflects IMB’s conservative financial structure, which is aligned with the lower end of the group’s leverage target.
Key Rating-Case Assumptions
– Consolidated revenue (net of excise taxes) declines in the low-single digits over the medium term absent tangible shift towards smoke-free product offerings. Fitch’s forecast assumes combustible industry volume declines in the high-single digits that are largely offset by price realization. Fitch believes Altria is well-positioned to navigate these pressures due to strong brand loyalty and revenue growth management tools
– EBITDA is projected to remain in the low to mid USD12 billion range over the medium term as strong price realization and margin initiatives are offset by volume declines and other business investments
– Altria’s capital allocation framework supports significant shareholder returns through low capital intensity, with CAPEX projected at 1-2% of revenues and dividend per share growth in the mid-single digits over the medium term. Share repurchases are projected at $1 billion in 2026 and beyond
– FCF is projected to remain at close to $1 billion over the medium term
– Most of Altria’s capital structure is fixed rate debt. The company has limited exposure to variable rates through its commercial paper (CP) program. Altria normally accesses its CP program during the second quarter of the year to fund master settlement agreement payments and shareholder dividends and pays that down over subsequent quarters. Altria had no CP borrowings outstanding at end-2025 or end-2024
– EBITDA leverage sustained at close to 2x, barring any significant debt financed acquisitions.
Rating Sensitivities
– Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: EBITDA Leverage sustained above 2.5x due to weaker than expecting operating performance and/or financial policy decisions (driven by elevated volume erosion, earnings deterioration, cash flow pressures, and/or aggressive M&A strategy or shareholder initiatives); An unexpected adverse change in regulatory environment that negatively affects recent growth investments or accelerates tobacco volume declines; Substantial reversal in litigation environment, leading to expectations for an excessively large judgement.
– Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Tangible progress toward increased contribution to revenue, operating profit and cash flow from Altria’s smoke-free product offerings to offset the long-term volume erosion in the base tobacco business; Demonstrated track record and commitment to sustaining EBITDA leverage below 2x, with mid-to-high single digit FCF margins.
Liquidity and Debt Structure
Liquidity was strong at year-end 2025, with cash balances of $4.5 billion and full availability under its $3.0 billion revolving credit facility maturing October 2029. The facility fully backstops Altria’s CP program, with no CP outstanding at the end of the year. Fitch believes excess liquidity is important due to PM USA’s annual payments for state settlement agreements and FDA user fees, which totaled $3.2 billion and $3.7 billion in 2025 and 2024, respectively. Altria normally accesses its CP program during the second quarter of the year to fund master settlement agreement payments and shareholder dividends.
Long-term debt maturities in the next couple of years consist of $1.6 billion in 2026, about $1.1 billion in 2027 and $500 million in 2028, which Fitch expects to be refinanced. Fitch assigns the higher of two short-term options (F1) for the rating profile. Any material weakening in financial flexibility, financial structure or operating environment conditions could lead to the assignment of the lower of the two short-term options for the current long-term profile.
August 2025: Fitch rates Altria’s proposed senior unsecured notes “BBB”
Fitch Ratings assigned Altria’s proposed two-tranche benchmark-sized notes offering ($500 million 4.5% notes due 2030 and $500 million 5.25% notes due 2035) a rating of “BBB”. Net proceeds from this offering will be used for general corporate purposes. Altria’s rating reflects its significant EBITDA scale and leadership in the U.S. cigarette market, driven by its Marlboro franchise and leading positions in oral tobacco products. The rating also considers Altria’s strong profitability and cash flow, supported by consistent pricing power. However, Altria’s reliance on the U.S. market limits geographic diversification and increases regulatory risk exposure, constraining its business profile. Additional constraints include ongoing secular declines in combustible cigarette consumption and uncertainties related to transitioning to smoke-free products in an increasingly competitive market. Fitch expects Altria to maintain a consistent capital allocation framework that favors shareholders, with mid-single-digit dividend growth and active share repurchases, while sustaining EBITDA leverage around 2x. For further details: See the June 2025 note below.
Moody’s Ratings assigned A3 to Altria’s new US$ backed senior unsecured long term notes issued in multiple tranches. All other ratings for Altria, including the A3 senior unsecured, Prime-2 commercial paper and (P)A3 medium-term note program, remain the same with outlook Stable.
S&P Global Ratings rates Altria’s long-term issuer credit and senior unsecured debt ratings BBB+ and short-term and commercial paper (CP) ratings A2. The outlook is Stable.
June 2025: Fitch affirmed Altria’s BBB credit rating. Outlook Stable
Fitch Ratings affirmed Altria’s Long-Term Issuer Default Rating (IDR) at BBB and Short-Term IDR at F2 with Outlook Stable.
Assessment Summary
Altria’s rating reflects its significant EBITDA scale and leadership in the U.S. cigarette market, driven by its Marlboro franchise and leading positions in oral tobacco products. The rating also considers Altria’s strong profitability and cash flow, supported by consistent pricing power. Altria’s reliance on the U.S. market limits geographic diversification and increases regulatory risk exposure, constraining its business profile. Additional constraints include ongoing secular declines in combustible cigarette consumption and uncertainties related to transitioning to smoke-free products in an increasingly competitive market. Fitch expects Altria to maintain a consistent capital allocation framework that favors shareholders, with mid-single-digit dividend growth and active share repurchases, while sustaining EBITDA leverage around 2x.
Key Rating Drivers
– Leading Tobacco Market Share: Smokable portfolio is anchored by the Marlboro franchise, which commands strong brand loyalty with roughly 59% of the premium segment and steadily gains premium share during the past several years. Altria’s smokable portfolio captures roughly half of the U.S. market and generates more than 85% of consolidated operating income. Nevertheless, persistent inflation and moderating savings levels have affected the purchasing power, particularly among middle- to lower-income households, leading to increased downtrading, with discount tobacco brands gaining retail share over the past couple of years. Fitch believes purchasing power will remain under pressure due to the tariff implementation and weak consumer sentiment. Fitch expects PM USA will use revenue growth management tools and the Marlboro Black brand to manage price gaps and mitigate negative effects.
– Long-Term Portfolio Uncertainties: Fitch sees Altria’s main long-term rating risk over the next decade as its ability to develop a strong smoke-free product portfolio that maintains long-term nicotine share amid regulatory, competitive and consumer uncertainties. As the portfolio migration occurs, Altria will need to generate top-line growth and contribution margins that are at least on par with existing mature tobacco brands to support stable to growing cash flows. Altria’s innovation pipeline for smoke-free products has improved across the oral nicotine pouch and heated tobacco spaces. However, the exclusion order banning NJOY importation is a recent setback until a reworked e-vapor product returns to the market. Additionally, Altria and other U.S. manufacturers have made little progress in transitioning tobacco portfolios to smoke-free products compared to other international markets due to the U.S. regulatory environment and enforcement challenges for illegal e-vapor products. Altria’s net sales from innovative products, such as on!, is relatively small in the low single digits.
– Pricing Power, Strong Profitability: Altria offsets long-term secular volume declines with consistent pricing power, demonstrated by strong price realization that supports a mostly stable top line of around $20 billion. Fitch-adjusted EBITDA of about $12 billion, with an EBITDA margin approaching 59% in 2024, is markedly higher than the $9.2 billion and 48% in 2016, reflecting reduced variable costs and operating efficiencies. Fitch projects 2026 EBITDA levels to be relatively flat due reflecting current macro-environment.
– Competitive Environment Intensifying: Philip Morris International is awaiting approval for its new IQOS ILUMA device which could increase competitive intensity over time. Fitch believes PMI can quickly ramp up U.S. sales, leveraging Swedish Match’s existing platform. PMI has a strong record of IQOS launches in international markets. PMI also manufactures ZYN which holds a dominant share in the U.S. oral nicotine pouch market which has demonstrated robust growth.
– Secular Volume Declines: Overall tobacco volumes of combustible, oral tobacco and e-vapor across the U.S. tobacco category, excluding illicit e-vapor, have declined by the low single digits annually over the past five years. The cigarette category declines have increased to the high single digits, due to macroeconomic pressures and volume loss to the illicit e-vapor market. Fitch expects volume declines to remain high due to these pressures. Uncertainty also surrounds the effectiveness of regulatory efforts to curb illicit e-vapor usage and its impact on the category’s long-term development.
– Stable Leverage Expectations: Fitch projects EBITDA leverage of about 2x in 2025. This is consistent with EBITDA leverage the past couple of years. Altria’s capital allocation policy aims to maintain 2.0x net EBITDA leverage, achieve annual dividend growth in the mid-single digits, and attain long-term mid-single-digit adjusted diluted EPS growth. Fitch believes this leverage target supports Altria’s credit profile, considering the long-term secular changes in its tobacco portfolio.
– ABI Stake: Fitch believes Anheuser-Busch InBev (ABI) ownership stake provides support to Altria’s credit profile as it migrates its combustible tobacco portfolio to reduced-risk products. This stake enhances Altria’s financial flexibility, enabling further portfolio reshaping that may need to occur during this transition. Altria holds an 8.1% stake in its ABI, valued at about $11.3 billion. During 2024, Altria executed a $2.4 billion accelerated share repurchase through the sale of about 38 million in ABI shares. Key factors that Fitch will use to assess ratings impact on any future ABI share sales include the use of net proceeds and clarity on smoke-free portfolio evolution. Further ABI share sales could negatively affect ratings if proceeds are solely used for shareholder returns rather than business investments, particularly if there is a lack of clarity and progress in transitioning to smoke-free products.
Peer Analysis
Altria’s comparable peers include PMI (A/Stable), British American Tobacco (BAT; BBB+/Stable) and Imperial Brands (BBB/Stable). PMI’s ratings are anchored in its market and price leadership in the global tobacco industry (excluding the U.S. and China), supported by a diverse portfolio of leading tobacco brands in the countries in which it operates. PMI has large market shares and pricing leadership in many profitable tobacco markets. PMI is the global leader in next generation, reduced-risk products and is the leading manufacturer in the heated tobacco segment.
BAT’s rating reflects its strong business profile as one of the largest global tobacco companies in a fairly consolidated sector, with wide regional and brand diversification. BAT’s broad next generation products (NGP) portfolio and exposure to a wide range of mature, cash-generating and emerging markets offer good growth potential. The credit profile remains supported by BAT’s conservative financial policy with a commitment to a target leverage range, which provides good headroom under the BBB+ rating.
Imperial’s rating reflects its focus on cash-generative and profitable, but mature, combustible tobacco markets. These continue to have structurally declining volumes, but the company benefits from price increases and market share progress in the growing NGP category, albeit from a low base. It also reflects Imperial’s conservative financial structure, which is aligned with the lower end of the group’s leverage target.
Key Assumptions
– Consolidated revenue (net of excise taxes): Low-single digit decline in 2025. Combustible industry volume declines in the high-single digits as inflation, gas prices and rising interest rates combined with elevated down-trading trends to discount brands is largely offset by price realization. The loss of NJOY modestly impacts top-line revenue. Fitch believes Altria is well-positioned to navigate these pressures due to strong brand loyalty and revenue growth management tools. Consolidated revenue in 2026 could improve modestly but is expected to remain in a low single-digit decline due to similar factors, reflecting a modest recovery in consumer health.
– EBITDA: Around $12 billion in 2025 and 2026, essentially flat versus 2024, supported by strong price realization offset by volume declines and macroeconomic pressures.
– Capital allocation framework: Low capital intensity at about 1%. Fitch expects the annual dividend, projected at about $6.9 billion in 2025, to increase in the mid-single digits in 2026. Share repurchases are projected at $1 billion in 2025 and 2026.
– Free Cash Flow: Around $700 million in 2025 reflecting higher taxes. This compares to $1.8 billion in 2024. In 2026, FCF could be around $1 billion.
– Debt: Most of Altria’s capital structure is fixed rate debt. The company has limited exposure to variable rates through its commercial paper (CP) program. Altria normally accesses its CP program during the second quarter of the year to fund master settlement agreement payments and shareholder dividends and pays that down over subsequent quarters. Altria had no CP borrowings outstanding at end-2024 or end-Q1 2025. EBITDA leverage will be sustained around 2x, barring any debt financed acquisitions.
– Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Long-term volume erosion in base tobacco business, resulting in operating profile deterioration and earnings pressure, with inability to offset this with growth in revenue and operating profit from the smokeless segment; Further ABI share sales with net proceeds used solely for shareholder returns versus investments in the business particularly if there is a lack of clarity and progress with the transition to smoke-free products; A more aggressive strategy related to M&A and/or shareholder initiatives resulting in EBITDA leverage sustained above the low 3x range; An unexpected adverse change in regulatory environment that negatively affects recent growth investments or accelerates tobacco volume declines; Substantial reversal in litigation environment, leading to expectations for an excessively large judgement.
– Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Tangible progress toward increased contribution to revenue, operating profit and cash flow from Altria’s smoke-free product offerings to offset the long-term volume erosion in the base tobacco business; EBITDA leverage sustained below 2.5x; FCF margin sustained above 3%, reflecting a stable operating environment and consistent shareholder remuneration policies.
Liquidity and Debt Structure
Liquidity is strong with cash balances of $4.7 billion (as of March 31, 2025) and full availability under the $3.0 billion revolving credit facility maturing October 2028. The facility fully backstops Altria’s CP program, with no CP outstanding at the end of the quarter. Altria issued $1 billion in February 2025 to partially fund H1 2026 maturities that totaled $1.5 billion. Fitch believes excess liquidity is important due to PM USA’s annual payments for state settlement agreements and FDA user fees, which totaled $3.9 billion and $4.3 billion in 2024 and 2023, respectively. Altria normally accesses its CP program during the second quarter of the year to fund master settlement agreement payments and shareholder dividends.
Long-term debt maturities in the next couple of years consist of $1.6 billion in 2026, about $1.1 billion in 2027 and $500 million in 2028 – which will be refinanced. Fitch assigns the higher of two short-term options (F2) for the rating profile, based on its assessment of Altria’s financial flexibility. Any material weakening in financial flexibility, financial structure or operating environment conditions could lead to the assignment of the lower of the two short-term options for the current long-term profile.
May 2025: S&P Global upgrades Altria’s credit rating to BBB+
S&P Global Ratings raised Altria’s long-term issuer credit and senior unsecured debt ratings from BBB to BBB+ and affirmed A-2 short-term and commercial paper (CP) ratings. The outlook is revised from Positive to Stable.
Assessment Summary:
According to S&P Global, Altria continues to report solid profitability, cash flow, and credit metrics, mainly due to the pricing power of its traditional tobacco products, and its stated financial policy commitment. Altria also continues to work on improving its next generation smokeless product pipeline, including refining its e-vapor strategy, introducing an upgraded nicotine pouch product, and bringing to market several heat-not-burn offers – even if many of these initiatives are still 1 to 3 or more years away. Altria’s NJOY ACE e-vapor product was removed from the market earlier this year due to a patent dispute, resulting in an $873 million goodwill impairment. The tobacco company is also reassessing its U.S. smoke-free targets contained in its 2028 Enterprise Goals, mainly due to the continued proliferation of illicit-flavored disposable e-vapor products primarily imported from China. Nevertheless, S&P Global believes that Altria should be able to continue offsetting industry headwinds over the next few years and maintain solid credit metrics.
The Stable outlook reflects the expectation that Altria will maintain its industry leading operating profit margin and sustain S&P Global Ratings-adjusted leverage in the low-2x area, despite significant combustible cigarette and moist smokeless tobacco volume declines. This should enable the company to maintain very strong free operating cash flow (FOCF) to continue its efforts to develop a competitive next generation smokeless product portfolio.
Assessment Details:
S&P Global anticipates that Altria will sustain credit metrics well below the potential downgrade trigger over the next two years primarily due to its brands’ pricing power and its financial policy commitment. The forecast assumes adjusted EBITDA margin percentage remains very high (62.0%-62.5%, compared with 60% in 2024) due to the company’s strong pricing power despite continued 10%-12% smokeable products’ volume declines, leading to lower net revenues. Adjusted EBITDA is assumed to decline modestly in 2026 and thereafter. S&P Global assumes no material sales contribution from Altria’s pipeline of next generation smokeless products (such as Ploom with Marlboro heat sticks or SWIC heat-not-burn capsules) or the return of NJOY ACE or a similar e-vapor product, all of which present upside to sales forecast. S&P Global anticipates around $8 billion annual FOCF over the next few years, which is sufficient to pay the dividend; however, the excess cash flow is projected to decline as the dividend per share grows by a mid-single digit rate annually and sales performance is weak, despite continued very high adjusted EBITDA margin.
The rating action also incorporates Altria’s demonstrated financial policy commitment. Altria targets a company-defined (gross) debt-to-consolidated EBITDA ratio of approximately 2.0x. Its actual ratio as of March 31, 2025, was 2.1x, compared to 2.0x S&P Global Ratings-adjusted leverage. The company formalized this policy in early 2023; however, it has maintained leverage in this area since 2021. The forecast reflects adjusted leverage maintained in the low-2x area over the next few years.
The removal of NJOY ACE from the market was nevertheless a setback to Altria’s efforts to develop a competitive next-generation smokeless product portfolio. JUUL’s patent litigation against NJOY has resulted in the U.S. International Trade Commission’s (ITC) issuing an exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE (NJOY’s pod-based e-vapor product) in the U.S. Altria views the Federal Drug Administration (FDA)-authorized e-vapor as critical to the future U.S. nicotine category. While NJOY ACE’s sales contribution was insignificant and it operated at a loss, Altria took an $873 million goodwill impairment charge against its NJOY investment. Altria is also reassessing its smoke-free goals due to the proliferation of illicit-flavored disposable e-vapor products primarily from China. Altria will work toward bringing a competitive e-vapor product to market while continuing to invest in other next-generation smokeless products. Altria has stated it intends to appeal the ITC’s decision while continuing to work to finalize a product solution that address all four patents. However, given the proliferation of illicit (flavored) e-vapor products, which Altria estimates control over 60% of the market, it is highly unlikely it will reach a settlement with JUUL. Altria will continue to interact with industry participants – including the FDA – with the goal of removing illicit products from the market and potentially facilitating FDA-authorized flavored choices. S&P Global does not expect Altria will return to the market with an e-vapor product over the next 12 months.
S&P Global believes in Altria’s ability to develop a competitive next-generation smokeless product portfolio given its substantial scale and cash flow available for investment, its very strong position in the U.S. tobacco space including ownership of the Marlboro brand name, its extensive distribution network, and shelf-space dominance of the traditional tobacco market. The substantial value (around $10.7 billion market value) of Altria’s investment in Anheuser-Busch InBev SA/NV (ABI) could be used for investment in the business; though this financial investment provides no ratings uplift since Altria could use it for share repurchases, as it did in 2024.
Altria has experienced good results with respect to its On! nicotine pouch brand, which holds 8.8% share of the oral tobacco category (up 1.8 points over the last year) and is the second largest nicotine pouch brand in the U.S. after Philip Morris International’s Zyn. Other moves with respect to next-generation smokeless products include:
– The filing of a Premarket Tobacco Product Application (PMTA) in May 2024 for NJOY ACE 2.0 Blueberry and Watermelon with Bluetooth-enabled access restriction technology submission;
– The filing of a PMTA in June 2024 for its upgraded On!PLUS product while testing it internationally;
– The first FDA authorization for Menthol E-vapor products on NJOY ACE;
– The expected filing of a PMTA and Modified Risk Tobacco Product Application (MRTPA) for Ploom with Marlboro Heatsticks; and
– The ongoing investment in the research and development (R&D) of SWIC – heat-not-burn (HNB) capsule product.
S&P Global believes FDA authorization of flavored (e.g., Blueberry and Watermelon) e-vapor products is possible, it may be difficult to achieve considering the FDA’s prior experience with JUUL around 2018 (when high youth initiation occurred). Altria believes its Bluetooth-enabled access restriction technology can mitigate this risk.
S&P Global’s forecast assumes Altria will not bring an e-vapor product to market or record any sales from next-generation smokeless product pipeline despite continued R&D investment and the possibility for making bolt-on acquisitions to expand its portfolio of products, potentially around synthetic nicotine.
Factors that could lead to a Lower Rating over the next 24 months:
– Further significant consumer-demand shifts to legal or illicit next-generation smokeless products, in which the company cannot participate due to an inability to develop a competitive next-generation product portfolio
– Continued large combustible cigarette volume declines and a deterioration in Marlboro pricing power, potentially due to stretched smoker budgets
– Unexpected material regulatory or litigation setbacks
– Deviation from current financial policies and large debt-financed acquisitions or share buybacks that result in adjusted leverage sustained at or above 3x.
Factors that could lead to a Higher Rating over the next 24 months: (highly unlikely)
– Successful development of a competitive next-generation smokeless product portfolio while maintaining industry-leading profitability
– Adherence to its existing financial policy commitment, such that adjusted leverage is maintained below 2.5x.
February 2025: Fitch affirmed “BBB” rating for Altria’s senior unsecured notes
Fitch rates Altria’s senior unsecured notes “BBB” (no change)1. Altria’s rating reflects its significant EBITDA scale and leadership in the U.S. cigarette market, driven by its Marlboro franchise and leading position in traditional oral tobacco products. The rating also considers Altria’s strong profitability and cash flow, supported by consistent pricing power. Altria’s reliance on the U.S. market limits geographic diversification and increases regulatory risk exposure, constraining its business profile. Additional constraints include ongoing secular declines in combustible cigarette consumption and uncertainties related to transitioning to smoke-free products in an increasingly competitive market. Fitch expects Altria to maintain a consistent capital allocation framework that favors shareholders, with mid-single-digit dividend growth and active share repurchases, while sustaining EBITDA leverage around 2x.
Altria’s comparable peers include Philip Morris International (PMI: A/Negative), British American Tobacco plc (BAT; BBB+/Stable) and Imperial Brands PLC (IMB: BBB/Stable). PMI’s rating is anchored in its market and price leadership in the global tobacco industry (excluding the U.S. and China), supported by a diverse portfolio of leading tobacco brands in the countries in which it operates. PMI has large market shares and pricing leadership in many profitable tobacco markets. PMI is the global leader in Next Generation (Reduced-Risk) Products and is the leading manufacturer in the heated tobacco segment.
BAT’s rating is supported by its strong business risk profile as one of the largest global tobacco companies in a fairly consolidated sector, with wide regional and brand diversification. Its credit profile is also supported by a broad portfolio of Next Generation products (NGPs). The company’s portfolio offers good growth potential, with exposure to a wide range of mature, cash generating and emerging markets. Fitch expects further deleveraging supported by the tightening of the company’s leverage-target corridor, as well as improved profitability and strong FCF generation.
Imperial’s rating reflects its focus on cash-generative and profitable, but developed, combustible-tobacco markets that are characterized by structurally declining volumes and supplemented by selective NGP offerings. It also reflects IMB’s conservative financial structure that is in line with the lower band of its communicated leverage target. Disciplined capital allocation and financial policy remain key to protecting IMB’s rating, as its focus on mature markets leads to moderate growth assumptions for the core business.
Rationale for the Rating
– Leading Tobacco Market Share: Altria’s smokable portfolio is anchored by its Marlboro franchise, the leading U.S. cigarette brand. Marlboro commands strong brand loyalty and holds around 59% of the premium segment with stable retail market share. The company’s smokable portfolio captures roughly half of the U.S. market and generates about 86% of consolidated operating income.
– Long-Term Portfolio Uncertainties: Fitch sees Altria’s main long-term rating risk over the next decade as its ability to develop a strong smoke-free product portfolio that maintains long-term nicotine share amid regulatory, competitive and consumer uncertainties. As the portfolio migration occurs, Altria will need to generate top-line growth and contribution margins that are at least on a par with existing mature tobacco brands to support stable to growing cash flows. Although Altria’s innovation pipeline for smoke-free products has improved, Altria (and other U.S. manufacturers) made little progress in transitioning tobacco portfolios to smoke-free products compared to other international markets (e.g. Philip Morris International) due to the U.S. regulatory environment and enforcement challenges for illegal e-vapor products.
– Competitive Environment Intensifying: PMI is awaiting FDA approval for its new IQOS ILUMA device, with plans of a major U.S. launch in 2H25, which could increase competitive intensity. PMI also manufactures ZYN after acquiring Swedish Match, which holds a dominant share in the U.S. nicotine pouch market. PMI can quickly ramp up U.S. sales, leveraging its existing platform, and has a strong record of IQOS launches in international markets.
– Smoke-Free Sales Comparison: PMI projects net smoke-free net sales close to $15 billion in 2024, or about 38% of total net sales. This compares to about 14% at Altria, or $2.8 billion, which includes oral tobacco products like Copenhagen and Skoal. Altria’s net revenue from innovative smoke-free products, such as NJOY and on!, is fairly small at $0.3 billion, or about 2%. By 2028, Altria targets total U.S. smoke-free net revenue of $5 billion, with $2 billion from smoke-free product innovation (note: these targets will be revised). The smoke-free business would be roughly 20% of sales, assuming combustible products sales remains flat.
– Secular Volume Declines: Overall tobacco volumes of combustible, oral tobacco and e-vapor across the U.S. tobacco category, excluding illicit e-vapor usage, have declined by the low-single digits annually over the past five years. The cigarette category declines have increased to the high-single digits, due to macroeconomic pressures and volume loss to the illicit e-vapor market. Volume declines will remain high due to these pressures. Uncertainty also surrounds the effectiveness of regulatory efforts to curb illicit e-vapor usage and its impact on the category’s long-term development.
– Pricing Power, Strong Profitability: Altria offsets long-term secular volume declines with consistent pricing power, demonstrated by strong price realization that supports a mostly stable top line of around $20 billion. Fitch-adjusted EBITDA of about $12 billion, with an EBITDA margin approaching 59% in 2024, is markedly higher than the $9.2 billion and 48% in 2016, reflecting reduced variable costs and operating efficiencies.
– ABI Stake Benefits Profile: Anheuser-Busch InBev (ABI) ownership stake provides support to Altria’s credit profile as it migrates its combustible tobacco portfolio to reduced-risk products. This stake enhances Altria’s financial flexibility, enabling further portfolio reshaping that may need to occur during this transition. Altria retains an 8.1% stake in its ABI, valued at about $7.9 billion, down from an ~10% ownership interest following the sale of 38 million ABI shares in March 2024. Further ABI share sales could negatively affect ratings if proceeds are solely used for shareholder returns rather than business investments, particularly if there is a lack of clarity and progress in transitioning to smoke-free products.
– Stable Leverage Expectations: Altria’s EBITDA leverage was 2.1x at the end of 2024, modestly improving from 2.2x in 2023 due to roughly $1 billion in debt repayment. Altria’s capital allocation policy aims to maintain net EBITDA leverage around 2.0x, achieve annual dividend growth in the mid-single digits, and attain long-term mid-single-digit adjusted diluted EPS growth. This leverage target supports Altria’s credit profile, considering the long-term secular changes in its tobacco portfolio. Fitch projects EBITDA leverage of approximately 2x in 2025.
Key Assumptions
– Consolidated revenue (net of excise taxes) that is flattish at around $20 billion in 2025. Fitch’s forecast assumes combustible industry volume declines in the high-single digits similar to 2024, with elevated down-trading trends to discount brands that is offset by price realization and growth in innovative smoke-free products. Altria is relatively well-positioned to navigate these pressures due to strong brand loyalty and revenue growth management tools.
– EBITDA of around $12 billion in 2025, essentially flat versus 2024, supported by strong price realization offset by volume declines, macroeconomic headwinds and investments in smoke-free products.
– Altria’s capital allocation framework supports significant shareholder returns through low capital intensity at about 1%. Fitch expects the annual dividend, projected at about $6.9 billion in 2025, to increase in the mid-single digits annually. Share repurchases are projected at $1 billion in 2025 (note: already confirmed).
– Free Cash Flow (FCF) to be roughly $1.5 billion in 2025.
– Most of Altria’s capital structure is fixed-rate debt. The company has limited exposure to variable rates through its commercial paper (CP) program. Altria normally accesses its CP program during the second quarter of the year to fund master settlement agreement (MSA) payments and shareholder dividends, and pays that down over subsequent quarters. Altria had no CP borrowings outstanding at YE 2024.
– EBITDA leverage sustained around 2x, barring any debt-financed acquisitions.
Catalysts for future rating action
– Positive: Tangible progress toward increased contribution to revenue, operating profit and cash flow from Altria’s smoke-free product offerings that offsets the long-term volume erosion in the base tobacco business; EBITDA leverage sustained below 2.5x; FCF margin sustained above 3%, reflecting a stable operating environment and consistent shareholder remuneration policies.
– Negative: Long-term volume erosion in the base tobacco business, resulting in operating profile deterioration and earnings pressure, with an inability to offset this with growth in revenue and operating profit from the smokeless segment; Further ABI share sales, with net proceeds used solely for shareholder returns rather that investments in the business, particularly if there is a lack of clarity and progress on the transition to smoke-free products; A more aggressive strategy related to M&A and/or shareholder initiatives, resulting in EBITDA leverage sustained above the low 3x range; An unexpected adverse change in regulatory environment that negatively affects recent growth investments or accelerates tobacco volume declines; Substantial reversal in litigation environment, leading to expectations for an excessively large judgement.
Liquidity & Debt Structure
– Strong liquidity, with cash balances of $3.1 billion and full availability under the $3.0 billion revolving credit facility maturing October 2028. The facility fully backstops Altria’s CP program, with no CP outstanding at the end of 2024. Excess liquidity is important due to the annual payments for state settlement agreements and FDA user fees, which totaled $4.6 billion and $4.3 billion in 2022 and 2023, respectively.
– Manageable long-term debt maturities with about $1.6 billion in 2025, $1.6 billion in 2026 and about $1.1 billion in 2027 (to be refinanced).
– Fitch assigns the higher of two short-term options (F2) for the rating profile, based on its assessment of Altria’s financial flexibility. Any material weakening in financial flexibility, financial structure or operating environment conditions could lead to the assignment of the lower of the two short-term options for the current long-term profile.
February 2025: S&P Global affirmed “BBB” rating (Outlook: Positive) for Altria’s senior unsecured notes
S&P Global Ratings rates Altria’s senior unsecured notes “BBB” with outlook Positive (no change)2. Altria’s rating reflects its dominant position in the U.S. tobacco industry with significant pricing power, market share, and brand equity; its strong profitability and free operating cash flow generation; and a good history of managing litigation risk. Altria also has a company-defined debt-to-EBITDA target of ~2x (i.e. S&P-adjusted leverage was also about 2x at the end of 2024) and has implemented strategic initiatives that are intended to improve its ability to compete in next-generation smokeless products, where it clearly trails other large international tobacco peers. However, the growth in illicit disposable e-vapor products has compromised Altria subsidiary NJOY’s ability to reach its previously established targets, which include becoming accretive to cash flow in 2025. Moreover, a patent infringement dispute between rival JUUL Labs and NJOY could lead to an importation and sale ban on NJOY’s ACE device. NJOY is a core element of Altria’s next generation product strategy. While these factors will pressure Altria’s next generation goals over the short to medium term, the company continues to manage well the secular decline in cigarette volumes (mainly through its pricing power) which has driven low-single digit operating profit growth in 2024 and solid credit ratios for the rating.
June 2023: Fitch affirmed Altria’s “BBB” Long-Term Issuer Default Rating
Fitch Ratings affirms Altria’s BBB Long-Term Issuer Default Rating (IDR) and F2 Short-Term IDR. The rating outlook is Stable. Fitch expects Altria to maintain a consistent capital allocation framework with a shareholder-friendly posture that includes mid-single digit growth in dividend payouts and active share repurchases while maintaining the EBITDA leverage around 2x3.
Rationale for the Rating
– Leading tobacco market share in the US: Altria’s smokable portfolio is anchored by its Marlboro franchise that holds ~59% share of the premium segment. Overall, Altria’s smokable portfolio captures roughly half of the US market volume and generates the majority of its cash flow (~86% of consolidated operating income).
– Strong profitability amid secular volume decline: Combined US nicotine market (combustible, oral tobacco and e-vapor; excluding illicit e-vapor) have declined at a low-single digit rate on annual basis during past five years. Cigarette decline accelerated from mid-single digits to the high-single digits in 2022/2023 due to the macro-economic pressures and volume loss to the illicit e-vapor market. Volume declines are expected to remain elevated although the regulatory efforts to curb illicit e-vapor usage have intensified. Altria offsets volume decline with pricing, resulting in a relatively stable top-line of around $20 billion. Reflecting the reduced variable costs and operating efficiencies, Fitch-adjusted EBITDA of $11.9 billion and EBITDA margin of 58% in 2023 is markedly higher than the $9.2 billion and 48% in 2016.
– Limited geographic diversification: Sole reliance on the US market heightens Altria’s exposure to potential changes in regulatory, legal and excise taxes. Business profile constraints also include a consumer preference shift to reduced-risk nicotine products, amplifying long-term combustible cigarette declines.
– Long-term portfolio uncertainties: Altria’s key long-term rating risk centers on its ability to develop a strong smoke-free product portfolio that maintains its nicotine share amid regulatory, competitive and consumer uncertainties. As the portfolio migration occurs, Altria needs to generate top-line growth and contribution margins that are at least on par with existing mature tobacco business to support stable to growing cash flows. Based on the recent announcements, Fitch believes Altria’s innovation pipeline for smoke-free products has improved. Nevertheless, given the current US regulatory environment and enforcement issues for illegal e-vapor products, Altria and other US manufacturers have made little progress in transition to smoke-free products.
– Increased competition: Philip Morris International (PMI) operates in the US market following the Swedish Match acquisition. PMI is awaiting FDA approval of IQOS ILUMA device for a larger-scale heated tobacco product launch and owns ZYN which leads the oral nicotine pouch category in the US.
– Anheuser-Busch Inbev (ABI) stake: Fitch believes the ABI stake (8.1% stake valued at about $9.6 billion) provides financial flexibility and credit profile support as Altria migrates from combustible tobacco portfolio to reduced risk products. However, further ABI share sales would begin to have more of a negative effect on ratings if used solely for shareholder returns instead of investments in the business, particularly if there is a lack of clarity and progress with the transition to smoke-free products.
– 2x Leverage: Altria’s EBITDA leverage was 2.1x in Q1 2024 following $1.2 billion in debt repayment during the quarter (vs. 2.2x at the end of 2023). Altria’s capital allocation policy includes a target of EBITDA leverage sustained around 2.0x, annual dividend growth in the mid-single digits and long-term mid-single-digit adjusted diluted EPS growth. Fitch believes Altria’s leverage target supports its credit profile, given the long-term secular changes occurring in its tobacco portfolio. Fitch expects EBITDA leverage of ~2x in 2024 and 2025.
Key Assumptions
– FY24 revenue (net of excise taxes): modest decline from $20.5 billion in 2023 to around $20 billion in 2024. The forecast assumes high-single digit combustible industry volume decline and elevated down-trading trends to discount brands to be largely offset by price realization
– FY25 revenue: flattish in 2025. The forecast assumes mid-single digit combustible industry volume decline (slower than 2022-2024 due to the reduction in illicit e-vapor product use), good price realization and increased revenue from innovative smoke-free products
– EBITDA: $12 billion in 2024 (essentially flat vs. 2023) and in the low $12 billion area in 2025. The forecast assumes the factors listed above (affecting the revenue progression) plus the investments in smoke-free products
– Capital allocation: Annual dividend payment of $6.8 billion in 2024 (to increase mid-single digit annually). Share repurchase of $3.4 billion in 2024 (mostly funded by the $2.4 billion ABI stake sale) and $1 billion in 2025
– FCF: Around $1.5 billion per annum ($2.3 billion in 2023)
– Debt structure: Mostly fixed rate debt
– EBITDA leverage: Sustained around 2x, barring any debt financed acquisitions.
Catalysts for future rating action
– Positive: Tangible progress toward increased financial contribution from smoke-free products (offsetting the long-term volume erosion in the base tobacco business); EBITDA leverage sustained below 2.5x; FCF margin sustained above 3%.
– Negative: Long-term volume erosion in base tobacco business, resulting in deterioration in financial delivery (lack of meaningful growth in financial contribution from smoke-free products); further ABI stake sale proceeds used solely for shareholder returns; EBITDA leverage sustained above the low-3x range; unexpected adverse change in regulatory environment and substantial reversal in litigation environment.
Liquidity & Debt Structure
– Liquidity: Cash balances of $3.6 billion and revolving credit facility of $3.0 billion (maturing October 2028)
– Annual MSA and FDA user fee payments: $4.6 billion and $4.3 billion in 2022 and 2023, respectively. Estimated average of $3.4 billion in the next three years
– Long-Term debt: $750 million in 2025, $1.6 billion in 2026 and $2.5 billion in 2027 (to be re-financed)
ESG Considerations
Altria’s Environmental, Social and Corporate Governance (ESG) Relevance Score (RS) of 4 for Customer Welfare/Fair Messaging, Privacy and Data Security (due to the risks its products pose to consumers’ health) and Exposure to Social Impacts (due to continued decline consumption and regulatory risk connected with the widespread, well-publicized health effects of tobacco products) negatively affect its credit profile.
Fitch: October 2023
Fitch Ratings assigns “BBB” rating to Altria’s senior unsecured notes4. Other comparable peers include Philip Morris International (PMI; A/Stable), British American Tobacco (BAT; BBB/Positive) and Imperial Brands (IMB; BBB/Stable).
Altria’s rating reflect its position as the industry leader in the US cigarette category, anchored by its Marlboro franchise (58% Premium segment share, 42% overall market share), and in the US moist smokeless tobacco (MST) category with strong profitability and cash flow that benefits from good pricing power. Altria’s business profile is constrained by limited geographic diversification, given its reliance on the US market and associated regulatory risks, secular combustible cigarette declines and uncertainties around the long-term portfolio shift to smoke-free products.
Altria will continue to focus on maximizing profitability in its core tobacco operations while reallocating resources to fund increased investments in smoke-free products. Fitch believes the robustness of Altria’s innovation pipeline materially increased given recent announcements (e.g. partnership with Japan Tobacco and NJOY acquisition). The key long-term risk centers on whether Altria’s product mix will evolve into a strong portfolio of non-combustible tobacco brands that maintains long-term nicotine share, particularly in light of the burdensome regulatory process, heightened competitive environment and uncertain consumer product acceptance. Altria will need to scale the smoke-free businesses, which are loss-making today, to generate contribution margins that are at least on par with existing mature tobacco brands, to support stable to growing cash flows.
Fitch: September 2023
Fitch Ratings issued a Credit Analysis report for the Global Tobacco companies5: PMI (A/Stable), BAT (BBB/Positive), Altria (BBB/Stable) and Imperial Brands (BBB/Stable). The ratings remain underpinned by strong operational cash flow generation across the industry.
Fitch states that US/UK tobacco companies show solid performance supported by continued good pricing power, along with resilient demand with only moderate volume pressure from weakening consumer purchasing power in some markets. In the medium term. Fitch believes most global tobacco companies to maintain their ability to implement price increases and develop product mixes that compensate for continuous volume declines in the core combustible segment.
Fitch expects smoke-free products – an increasingly material share of revenue for many – to gradually support sector revenue and profit. However, Fitch views the business risk profiles for rated tobacco companies as increasingly differentiated by the development of smoke-free products and notes that the smoke-free products require careful strategic execution to reflect differing and developing consumer tastes and preferences, as well as growing regulatory pressure on non-combustible products in many markets.
Fitch notes that credit rating headroom has improved for PMI with deleveraging on track after its significant Swedish Match acquisition in 2022 and BAT’s deleveraging supports the Positive outlook on the rating.
References:
- https://www.fitchratings.com/research/corporate-finance/fitch-rates-altria-proposed-senior-unsecured-notes-bbb-04-02-2025 ↩︎
- https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3318115 ↩︎
- Fitch Affirms Altria’s IDR at ‘BBB’; Outlook Stable (fitchratings.com) ↩︎
- https://www.fitchratings.com/research/corporate-finance/fitch-rates-altria-sr-unsecured-notes-bbb-30-10-2023 ↩︎
- https://www.fitchratings.com/research/corporate-finance/global-tobacco-ratings-gain-headroom-on-solid-profits-capital-allocation-19-09-2023 ↩︎
