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Altria : 1Q earnings miss as cigarette sales continue to slide

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04/25/2019 | 07:22am EDT

WASHINGTON (AP) — Shares of Altria Group, the nation's largest tobacco company, fell Thursday after the company's earnings missed expectations on lower cigarette revenue and big expenses aimed at diversifying its business.

The Richmond, Virginia-based company reported first quarter profit of $1.12 billion, or 60 cents per share. Adjusted for one-time costs and expenses the company earned 90 cents per share.

That fell short of Wall Street expectations of 92 cents per share, according to an analyst survey by Zacks Investment Research.

Altria, the maker of Marlboro cigarettes and Copenhagen chew, has been working to shift its business away from traditional tobacco products amid steady declines in the category. The U.S. smoking rate has been falling for decades amid smoking bans, higher taxes and public health efforts urging smokers to quit and discouraging young people from ever starting.

But Altria said cigarette shipments declined by 14%, faster than expected, pushing its revenue for Philip Morris USA and other smoking brands down 7%.

Company management reiterated full-year earnings in the range of $4.15 to $4.27 per share. Analysts expect $4.19 per share, according to FactSet.

Quarterly results were weighed down by $159 million in pretax expenses mainly tied to Altria's investments in Canadian cannabis investment firm Cronos and Juul, the e-cigarette startup company.

Altria is betting those investments will help replace falling cigarette sales in years ahead. But they noted the company assumes "little-to-no earnings" from Juul or Cronos in the current year.

Altria, which also sells cigars and wine, posted revenue of $5.63 billion in the period. Its adjusted revenue — or revenue net of excise taxes — was $4.39 billion, which also fell short of Street forecasts.

Altria issued more than $16 billion in debt to finance its recent investments, which includes a 35% stake in Juul, the Silicon Valley startup that has quickly conquered the U.S. vaping market.

But Juul's appeal to underage teenagers and Altria's investment have also attracted scrutiny from regulators.

The Food and Drug Administration has been scrambling to reverse an unexpected explosion in teenage vaping after 2018 survey results showed nearly twice as many high school students used e-cigarettes than the year before.

In March, the FDA summoned executives from Juul and Altria to the agency to discuss the problem.

Altria CEO Howard Willard said Thursday the FDA "encouraged" the companies "to take actions that might help reduce youth usage of e-vapor products."

Willard pointed to the company's recent advocacy for laws that would raise the minimum age to purchase all tobacco and vaping products to 21 from 18.

"We feel like we've taken significant actions, and frankly, that Juul and I have been on the leading edge of really proactively addressing that issue," Willard told analysts and investors.

A dozen states, including California, Massachusetts and Virginia, have passed legislation raising the purchase age to 21, some with lobbying support from Altria.

Last week Senate Majority Leader Mitch McConnell said he plans to introduce legislation that would raise the minimum age for purchasing tobacco on a national level. Altria is supporting that effort.

Tobacco industry critics have suggested Altria is supporting the age restrictions, in part, to head off harder-hitting proposals that would ban all flavored vaping products and menthol cigarettes, which comprise roughly one-third of the U.S. cigarette market.

Altria Group Inc. shares fell $3.63, or 6.6%, to $51.08 in midday trading.

Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on MO at https://www.zacks.com/ap/MO

Automated Insights, source Associated Press News

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Financials (USD)
Sales 2019 19 791 M
EBIT 2019 10 425 M
Net income 2019 7 243 M
Debt 2019 26 802 M
Yield 2019 7,93%
P/E ratio 2019 10,8x
P/E ratio 2020 9,50x
EV / Sales2019 5,26x
EV / Sales2020 5,19x
Capitalization 77 358 M
Duration : Period :
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Technical analysis trends ALTRIA GROUP
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 17
Average target price 54,71  $
Last Close Price 41,41  $
Spread / Highest target 64,2%
Spread / Average Target 32,1%
Spread / Lowest Target 6,25%
EPS Revisions
Howard A. Willard Chairman, CEO, COO & Executive Vice President
William F. Gifford Vice Chairman & Chief Financial Officer
George Muñoz Independent Director
Thomas F. Farrell Independent Director
Dinyar S. Devitre Independent Director
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