Altria Group (MO) classifies its businesses into the following segments:
- Smokeable Products
- Smokeless Products
In 4Q16, the Smokeable segment generated 84% of the company’s total revenue, while the Smokeless, Wine, and Other segments formed 10.3%, 5.1%, and 0.6% of total revenues, respectively.
1Q17 revenue estimates
Despite the continued decline in its cigarette shipments, analysts are expecting Altria to post revenue of $4.63 billion in 1Q17, which would represent a growth of 2.4% from $4.53 billion in 1Q16. The revenue growth is expected to be driven by the acquisition of Nat Sherman in January 2017, the rise in products prices, and product innovations.
On January 17, 2017, Altria acquired Nat Sherman, which manufactures and markets super-premium cigarettes and premium cigars.
Analysts are expecting a rise in cigarette prices by $0.07 per pack in May 2016, the nationwide launch of Marlboro Slate (a menthol product in the Marlboro Black family), and growth in Black & Mild’s sales to drive Smokeable segment’s sales.
In the Smokeless segment, the success of Copenhagen Mint and the rise of Copenhagen and Skoal’s prices by $0.07 in May 2016 are expected to drive the segment’s revenue in 1Q17.
Altria has also been focusing on expanding its e-vapor products under Nu-Mark division, which is also expected to contribute to revenue growth. The company, which accounts for the 55% of vaping market, launched its latest product MarkTen XL in September 2016.
Peer comparisons and outlook
For 2017, analysts are expecting Altria to post net revenues of $19.8 billion, which would represent a growth of 2.4% from $19.33 billion in 2016. Analysts expect the acquisition of Nat Sherman, and the rise of cigarette prices by $0.08 per pack on March 19, 2017, to drive Altria’s 2017 revenue growth.
Next, we’ll look at analysts estimates for Altria’s 1Q17 margins.