Please ensure Javascript is enabled for purposes of website accessibility

Why Altria Stock Dropped 7%

By Rich Smith – Apr 25, 2019 at 2:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors stub out Altria after its earnings miss.

What happened

Shares of cigarette maker Altria Group (MO -0.62%) -- the artist formerly known as Philip Morris -- are down 7% as of 2:05 p.m. EDT after reporting of disappointing earnings for Q1 2019.

Altria earned $0.60 per share in Q1. The company says that if adjusted for one-time items (i.e., pro forma), it actually would have earned $0.90 per share -- but even that was short of the $0.92 per share in pro forma profits that Wall Street had projected. Sales net of excise taxes were $4.4 billion, down 6% year over year and also short of Wall Street forecasts.

Man stubbing out a cigarette in an ashtray.

Investors stub out Altria after its earnings miss. Image source: Getty Images.

So what

Viewed from the perspective of GAAP accounting, Altria's numbers were arguably even worse. Reported earnings per share of $0.60 declined 40% in comparison to last year's Q1. Net revenues (which include collection of excise taxes) declined 8% to $5.6 billion.

Altria noted that shipments of traditional cigarettes declined 14% year over year, faster than expected. One of the moves the company is making to offset this trend of declining tobacco sales is a $1.8 billion investment in marijuana firm Cronos Group (CRON 1.95%), which the company says it completed during the quarter. Management noted that it now has a "45% economic and voting interest in Cronos with a warrant, if exercised in full, to acquire an additional 10% equity stake" -- which would give it majority control of a second new and growing business alongside its minority stake in the JUUL vaping company.

Now what

Although investors were disappointed in the quarterly numbers, Altria says its expectations for the year as a whole remain intact. Management reaffirmed full-year 2019 guidance for pro forma profits of between $4.15 and $4.27 per share. Taken at the midpoint ($4.21 per share), that means that despite disappointing investors in the year's first quarter, it still intends to earn more than Wall Street's expected $4.19 per share before the end of the year.

If Altria delivers on that promise, investors who sold the stock today may wish they hadn't.

Rich Smith 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Altria Group Stock Quote
Altria Group
MO
$44.74 (-0.62%) $0.28
Cronos Group Inc. Stock Quote
Cronos Group Inc.
CRON
$3.13 (1.95%) $0.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.