Tobacco giant

Altria

(MO) - Get Report

said profits fell 7.6% in the first quarter amid a sharp decline in domestic tobacco sales, but the company still managed to top analysts' earnings estimates by a penny and reaffirmed guidance for the full year.

Altria, formerly known as Philip Morris, reaffirmed full-year estimates of $4.60 to $4.70 a share this year. Analysts surveyed by Thomson Financial/First Call are looking for a profit of $4.61 a share.

Shares were recently down 1% to $32.09.

In its first quarter, the New York-based company reported earnings of $2.19 billion, or $1.07 a share, compared with $2.37 billion, or $1.09 a share, in the same period a year ago. Analysts were expecting $1.06 per share, according to First Call.

Although the results beat consensus estimates, Louis Camilleri, chairman and chief executive of Altria, said the quarter was "clearly overshadowed by developments in the Price class action suit against Philip Morris USA."

In March, an Illinois court ruled that the firm had deceived customers into thinking light cigarettes were less harmful than regular brands. Judge Nicholas Byron had ordered the company to post a $12 billion bond to appeal the case but he reduced the amount on Monday to just $6 billion.

The bond reduction made it possible for Philip Morris to make a quarterly payment of $2.6 billion to 46 states, as required by the 1998 settlement between states and tobacco companies. Philip Morris had warned that it would not be able to make the payment and could file for bankruptcy if the bond was not reduced.

Results in the first quarter were dragged down by a 24% drop in U.S. tobacco sales. Domestic tobacco sales fell to $3.8 billion in the quarter while income from the unit slid 41% to $742 million. Still, Philip Morris USA's total retail share in the first quarter climbed to 48.3% from 48.1% in the fourth quarter, while Marlboro's retail share was up fractionally to 37.5% as the firm spent more money on promotions and increasing sales staff.

Although shipment volume of its cigarettes fell 16%, shipments overseas rose 3.6% and profits from the international tobacco unit were up 8% in the first quarter to $1.7 billion.

Net sales fell 5.7% in the quarter to $19.4 billion, as the company lost revenue from its Miller Brewing Company, which it sold in July. Net revenue was boosted by $619 million due to favorable currency exchange rates.

In another development, Altria said it halted its stock repurchase program, saying its access to short-term corporate debt financing has suffered since its credit ratings were cut after the $12 billion class action ruling.

In February, Altria's board had approved a one-year, $3 billion share repurchase program. The company spent $689 million in the first quarter to buy back its shares.