Altria (MO)

Tobacco company Altria (NYSE:MO) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 14.5% year on year to $5.85 billion. Its non-GAAP profit of $1.30 per share was 1.3% below analysts’ consensus estimates.

Company Overview

Best known for its Marlboro brand of cigarettes, Altria (NYSE:MO) offers tobacco and nicotine products.

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Competitors in the tobacco and nicotine industry include Phillip Morris (NYSE:PM), British American Tobacco (LSE:BAT), and Imperial Brands (LSE:IMB).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $20.91 billion in revenue over the past 12 months, Altria is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. To expand meaningfully, Altria likely needs to tweak its prices, innovate with new products, or enter new markets.

As you can see below, Altria struggled to increase demand as its $20.91 billion of sales for the trailing 12 months was close to its revenue three years ago. This shows demand was soft, a rough starting point for our analysis.

This quarter, Altria reported year-on-year revenue growth of 14.5%, and its $5.85 billion of revenue exceeded Wall Street’s estimates by 16.6%.

Looking ahead, sell-side analysts expect revenue to decline by 3.6% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products will see some demand headwinds. At least the company is tracking well in other measures of financial health.

Altria has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 71.7% gross margin over the last two years. That means Altria only paid its suppliers $28.29 for every $100 in revenue.

Altria produced a 75.2% gross profit margin in Q4, up 4.6 percentage points year on year. Altria’s full-year margin has also been trending up over the past 12 months, increasing by 3.1 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Altria has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer staples business, boasting an average operating margin of 51.4%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Altria’s operating margin decreased by 7.1 percentage points over the last year. Even though its historical margin was healthy, shareholders will want to see Altria become more profitable in the future.

In Q4, Altria generated an operating margin profit margin of 30%, down 26.5 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, and administrative overhead grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Altria’s EPS grew at an unimpressive 3.8% compounded annual growth rate over the last three years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q4, Altria reported adjusted EPS of $1.30, in line with the same quarter last year. This print slightly missed analysts’ estimates. Over the next 12 months, Wall Street expects Altria’s full-year EPS of $5.42 to grow 2.7%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Altria has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging an eye-popping 40.9% over the last two years.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Altria’s five-year average ROIC was 43%, placing it among the best consumer staples companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We were impressed by how significantly Altria blew past analysts’ revenue expectations this quarter. We were also glad its gross margin outperformed Wall Street’s estimates. On the other hand, its EPS slightly missed. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 2.5% to $61.53 immediately following the results.

Updated: January 29, 2026 at 8:13 AM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Altria.

Altria possesses a number of positive attributes. Although its revenue growth was weak over the last three years and analysts expect growth to slow over the next 12 months, its admirable gross margins are a wonderful starting point for the overall profitability of the business. And while its declining operating margin shows the business has become less efficient, its impressive operating margins show it has a highly efficient business model.

Altria’s P/E ratio based on the next 12 months is 11.3x. When scanning the consumer staples space, Altria trades at a fair valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $62.92 on the company (compared to the current share price of $61.53), implying they see 2.3% upside in buying Altria in the short term.