Altria's Margin Expansion Hitting the Brakes: What Wall Street Missed

Altria (MO) just tightened its 2025 EPS guidance to $5.37-$5.45—barely budging from the old $5.35-$5.45 range. On the surface, it looks boring. But dig deeper and you’ll spot something interesting: the company’s margin growth engine might be starting to sputter.

The Numbers Behind the Caution

Let’s break down what actually happened:

In cigarettes: Adjusted OCI margins hit 64.4%, up 1.3 percentage points—solid but slowing. Pricing power is still there, but Altria’s losing market share to discount brands faster than the industry average (9% volume decline vs. 8% industry-wide). Translation: more price hikes are hitting a ceiling.

In oral tobacco: Margins jumped to 69.2%, a 2.4 percentage point gain. Looks great until you read the fine print—mix shifts toward cheaper products and heavy promotional spending are eating into the upside.

Why This Matters vs. the Competition

Philip Morris (PM) is doing better here. They raised full-year EPS guidance and reported stronger margin expansion (43.1% operating margin, +1.2 points) thanks to their smoke-free business growing 19.5% YoY. Meanwhile, Turning Point Brands (TPB) is mooning in Modern Oral (+627.6% growth).

Altria? Stuck defending traditional tobacco turf while rivals eat their lunch in the growth segments.

The Stock Market’s Verdict

MO is down 10% in a month while the industry barely budged (-1.7%). The market’s pricing in the slowdown.

Valuation: Trading at 10.48X forward P/E vs. industry average of 14.17X—cheap, but maybe for a reason. Consensus EPS estimates are stuck around $5.44 for 2025 and $5.56 for 2026. That’s not exactly screaming growth.

Rating: Zacks has it at Hold (Rank #3). The margin expansion story worked for a while, but the math is getting harder. Watch Q4—if EPS growth really “moderates” as management warned (lapses of 2024 tailwinds), the narrative could flip fast.