Altria Group, Inc. MO is facing growing challenges as it shifts its focus toward smoke-free alternatives. The company's efforts are being threatened by the rapid rise of illicit flavored disposable e-vapor products — a trend that is reshaping the U.S. nicotine market.
On its first-quarter 2025earnings call Altria highlighted that the adult e-vapor user base in the United States has surpassed 20 million, marking a year-over-year increase of more than 2.6 million users. Notably, disposable e-vapor products drove much of this growth, gaining nearly 4 million new users to reach around 14 million. However, Altria estimates that more than 60% of this expanding market is now controlled by unauthorized, non-compliant products.
The surge in illicit e-vapors is a major headwind for the company’s smoke-free revenue growth. Despite Altria’s increasing market presence in the smoke-free space, illegal competition is dampening its progress. This also hinders broader regulatory goals, such as reducing underage access and promoting harm-reduction alternatives to combustible cigarettes.
Altria continues to collaborate with regulators to address enforcement gaps. However, the persistent availability of illicit products remains a significant barrier. At the same time, cigarette shipment volumes are under pressure due to inflation and evolving consumer behaviors.
As regulatory uncertainty clouds the future of the e-vapor category, investors are watching closely. Can Altria achieve long-term growth in a smoke-free market dominated by illegal players? The answer may depend on regulatory action, product innovation and shifting adult tobacco consumer trends.
MO’s Competition in the Smoke-Free Category
Similar to Altria, major tobacco companies such as Philip Morris International Inc. PM and British American Tobacco p.l.c. BTI are also accelerating their transition toward smoke-free alternatives. These industry leaders are actively investing in reduced-risk products (RRPs) to meet changing consumer preferences and adapt to evolving regulatory landscapes.
Philip Morris is accelerating its shift toward RRPs, with smoke-free offerings contributing 44% of first-quarter 2025 gross profit. Driven by IQOS, ZYN and VEEV, it saw strong volume growth, a 20.4% rise in net revenues and a 33.1% increase in smoke-free gross profit. With products in 95 markets and 38.6 million users, Philip Morris is advancing toward a smoke-free future.
British American Tobacco is reshaping its business around RRPs, targeting 50 million consumers by 2030 and 50% revenue contribution by 2035. In 2024, its smokeless user base reached 29.1 million, with New Category revenues up 2.5%. British American Tobacco’s flagship brands — Vuse, glo and Velo — have collectively driven over £3 billion in revenues, reflecting its progress toward a smoke-free future.
MO’s Price Performance, Valuation & Estimates
Shares of Altria have gained 14.4% year to date compared with the industry’s growth of 40.8%.
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From a valuation standpoint, MO trades at a forward price-to-earnings ratio of 10.96X, below the industry’s average of 15.74X.
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The Zacks Consensus Estimate for MO’s 2025 earnings implies year-over-year growth of 5.3%, whereas its 2026 earnings estimate suggests a year-over-year uptick of almost 3%.
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MO stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
