Will Altria Stock Go Up in Smoke?
Altria Group (NYSE: MO), the largest U.S. tobacco company and owner of the Marlboro cigarette brand, has been raising the price of its product for decades to combat a smoking rate that's declined since the 1960s, when the Surgeon General first publicly declared cigarettes are harmful.
Smoking is still big business for Altria. Its smokable products accounted for $2.8 billion of its $3.1 billion operating income for its second quarter of 2022. Just how much longer Altria can offset its declining volumes with price increases is a fair question. Most investors own the stock for its dividend, which would face trouble if profits decline. Here is what investors need to know.
Cigarettes have proven to be relatively inelastic, meaning that increasing the price doesn't dramatically impact demand for the product. In other words, Altria keeps raising prices, and people keep buying cigarettes. Don't get me wrong, the company ships fewer cigarettes each year because of tobacco-related deaths, people quitting or reducing their smoking habit, and fewer people picking up smoking. Altria shipped 44 billion cigarettes through the first half of this year, down 8.8% from the first six months of last year.
Source Fool.com
