What happened

Shares of Altria Group, Inc. (NYSE:MO) dipped last month, falling 10% according to data from S&P Global Market Intelligence as the company reported disappointing sales growth in its fourth quarter and investors reacted to recent changes in the tobacco giant's management.

As the chart below shows, the stock started falling at the beginning of the month following the earnings release, but it stabilized after the first week in February.

MO Chart

MO data by YCharts.

So what

The Marlboro-maker said net sales excluding excise taxes were flat at $4.7 billion, missing estimates at $4.79 billion. The miss was caused by lower sales of smokeable products, which make up the vast majority of sales, and revenue dropped 1% net of excise taxes. Marlboro, which is Altria's and the world's biggest cigarette brand, also lost 70 basis points of market share in the third quarter. 

A person ashing a cigarette into an ashtray

Image source: Getty Images.

Operating margins in the quarter expanded, though, due to higher pricing and lower selling, general, and administrative costs, and adjusted earnings per share increased 34% to $0.91 because of higher equity earnings in its beer investment, increased operating margins, a lower tax rate, and fewer shares outstanding. That figure beat estimates at $0.80.

Outgoing CEO Marty Barrington called it "another strong year" for the company, touting strong income growth in the core tobacco segment, the acquisition of Nat Sherman, and its progress in becoming the leader in reduced-risk products.

The day after the report came out, the stock fell just 0.5%, but shares continued to drop in the subsequent days as investors reacted to news that Barrington was stepping down, to be replaced by Howard Willard. Barrington has guided the stock to steady returns during his tenure as CEO, so investor nervousness is understandable, especially considering the challenges facing the tobacco industry.

Now what

Altria offered strong guidance for 2018, projecting adjusted earnings-per-share growth of 15%-19% to $3.90-$4.03, getting a boost from tax reform. Early in March, the company said it would raise its dividend earlier than expected, hiking the quarterly payout 6.1% to $0.70, which was the 49th year in a row the company has raised its dividend. With the help of that dividend increase, the stock has recovered some of its losses from last month, as the 4.5% yield is a reminder why investors hold the stock. Despite the February sell-off, there's no fundamental reason for investors to change their thesis, here.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.