Tobacco company Altria (NYSE:MO) announced better-than-expected revenue in Q1 CY2025, with sales up 11.5% year on year to $5.26 billion. Its non-GAAP profit of $1.23 per share was 3.5% above analysts’ consensus estimates.

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“Our highly profitable traditional tobacco businesses performed well in a challenging environment in the first quarter,” said Billy Gifford, Altria’s Chief Executive Officer.

Company Overview

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

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $20.99 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 a finite number of major retail partners, placing a ceiling on its 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 $20.99 billion of sales for the trailing 12 months was close to its revenue three years ago. This shows demand was soft, a tough starting point for our analysis.

This quarter, Altria reported year-on-year revenue growth of 11.5%, and its $5.26 billion of revenue exceeded Wall Street’s estimates by 13.5%.

Looking ahead, sell-side analysts expect revenue to decline by 3.5% 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.

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Cash Is King

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 40.8% over the last two years.

Key Takeaways from Altria’s Q1 Results

We were impressed by how significantly Altria blew past analysts’ revenue and EPS expectations this quarter. On the other hand, its gross margin missed. Overall, we think this was a decent quarter with some key metrics above expectations. The market seemed to focus on the negatives, and the stock traded down 2.1% to $56.92 immediately after reporting.

Big picture, is Altria a buy here and now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.