Altria Suffers More Volume Weakness in Q4, but Pricing and Heated Tobacco Can Mitigate the Decline

Altria again reported weak cigarette volume in the fourth quarter of 2022, but this was offset by strong price/mix, which meant the company reported revenue that was in line with our forecast and adjusted earnings per share of $1.18, $0.02 above our estimate. Although guidance for 2023 implies little change from prevailing trends, we have concerns over the spending power of the U.S. consumer, and we expect a more balanced approach to pricing strategies this year. We are leaving our $52 per share fair value estimate intact, and following the positive reaction to the update, the shares trade at a 10% discount to our fair value as at the close of trading on Feb. 1, a fairly modest margin of safety.