Altria Group (NYSE:MO) Inc.'s subsidiary, NJOY LLC, has filed lawsuits against 34 manufacturers, distributors, and online retailers from China and various U.S states such as Arizona and California. The suit, filed in the United States District Court for the Central District of California, alleges these companies violated California’s flavor-ban law and federal laws by selling illicit disposable vape products.
The implicated companies, including brands like Breeze and Elf Bar, are accused of creating unfair competition with firms that comply with regulations. The lawsuit seeks a nationwide injunction to halt the import and sale of these products and demands both compensatory and punitive damages.
This legal action comes in the wake of increased regulatory scrutiny over vaping products. In response to a surge in teenage vaping linked to Juul Labs Inc., which was partially owned by Altria at the time, the FDA initiated a crackdown on flavored vapes in 2018. This led to a full ban on Juul products in 2022. The FDA also recently banned Reynolds American (NYSE:RAI)'s Vuse Alto menthol e-cigarettes.
In a similar vein, British American Tobacco (NYSE:BTI) PLC lodged a complaint against disposable vape makers for similar reasons. Jefferies analyst Owen Bennett anticipates significant enforcement against illegal disposables soon.
Several defendants in the Altria lawsuit have already received FDA warning letters, stating their products are adulterated and misbranded, requiring marketing authorization.
In recent developments, Altria swapped its minority stake in Juul for a global license to some of Juul’s heated tobacco intellectual property. So far this year, Altria’s stock has fallen 6%, while the S&P 500 has fallen 12.5%.
Despite the recent fall in Altria's stock, the company has some strong financial indicators. According to InvestingPro, Altria has a market capitalization of 76.2 billion USD and a P/E ratio of 11.29, implying a low earnings multiple. The company also boasts an impressive gross profit margin of 69.44% and a return on assets of 18.45%. Moreover, Altria has been profitable over the last twelve months, with a basic EPS of 3.8 USD.
InvestingPro Tips also highlights Altria’s high earnings quality, with free cash flow exceeding net income, and the fact that the company has raised its dividend for 13 consecutive years. The company also pays a significant dividend to shareholders, with a yield of 9.09%. This is part of Altria's commitment to returning capital to shareholders; the company has maintained dividend payments for 53 consecutive years.
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