Altria Warns Earnings to Take Hit From Slowing U.S. Cigarette Sales

Cigarette maker Altria Group reports second-quarter adjusted earnings that match analysts' forecasts amid steady sales of its tobacco products, though warns that future earnings will be impacted by slowing cigarette sales in the U.S.
By M. Corey Goldman ,

Cigarette maker Altria Group (MO) - Get Report on Tuesday reported second-quarter adjusted earnings that matched analysts' forecasts amid steady sales of its tobacco products, though warned that future earnings will be impacted by slowing cigarette sales in the U.S.

Altria reported second-quarter net income of $1.98 billion, or $1.07 a share, vs. $1.88 billion, or 99 cents a share, in the year-earlier quarter. Excluding special items such as litigation, costs associated with Altria's investment in Anheuser-Busch InBev (BUD) - Get Report and its stake in Canadian cannabis producer Cronos (CRON) - Get Report , Altria earned $1.10 a share, matching the consensus estimate of analysts polled by FactSet.

Sales rose 5.5% to $5.19 billion, beating FactSet expectations of $5.09 billion. Marlboro, the company's leading cigarette brand, accounted for 43% of global market share, Altria said.

The company affirmed its full-year forecast of adjusted earnings of between $4.15 and $4.27 a share, though the company said it now expects U.S. cigarette volumes to decline between 5% and 6% this year as cigarette smokers switch to e-cigarettes.

The company previously forecast volumes to fall between 4% to 6%. Looking forward, Altria said it expects total domestic cigarette industry volumes to decline to between 4% and 6% through 2023, higher than its previously guided range of between 4% and 5%.

Altria has been moving to diversify away from cigarettes and tobacco products, earlier this year investing $1.8 billion for a 45% stake in Canadian cannabis company Cronos, and another $12.8 billion for a 35% stake in popular e-cigarette producer Juul.

However, investors and analysts who follow the company have expressed concern over its diversification plans, particularly its investment in Juul, which Altria executives were pressed on in a post-earnings conference call on Tuesday.

Altria will also start selling iQOS, a heated tobacco product, in the U.S. this summer. Philip Morris International will license the device to Altria. The Food and Drug Administration earlier this year cleared iQOS to be sold in the U.S.

"The dynamics during the first half of the year further validate our strategy," Altria CEO Howard Willard told analysts. "With increasing success migrating adult smokers to non-combustible products, we're pleased that our strong core businesses are well positioned to provide profit growth through this transition."

Shares of Altria were down 4.11% at $48.24 in afternoon trading on Tuesday.

Save 76% with our Summer Break Sale. Subscribe to our premium site Real Money and become a smarter investor! Click here today to sign up!

Loading ...