Shares of Altria (MO +0.15%), the domestic maker of Marlboro cigarettes, were pulling back after the company topped estimates in its third-quarter earnings report but lowered its earnings guidance for the year. As a result, the stock was down 7.7% as of 2:58 p.m. ET.
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Altria sees some challenges ahead
The tobacco giant said that revenue net of excise taxes fell 2.5% in the quarter to $5.28 billion, topping estimates at $5.12 billion. On the bottom line, adjusted earnings per share (EPS) was flat at $1.28, which was better than estimates at $1.22.
Cigarette volumes continued to decline, falling to 11.6% in the period, though higher pricing helped offset some of that decline. Management also said it's focused on driving growth at NJOY following its acquisition of the e-cigarette brand in June. It strengthened its supply chain and is investing in marketing as well.
CEO Billy Gifford said, "Our highly profitable traditional tobacco businesses were resilient in a dynamic operating environment during the third quarter and first nine months, providing fuel for our business transformation and significant cash returns to our shareholders."
What led to the sell-off in the stock was a cut in guidance for full-year EPS, from $4.98 to $5.03 down to $4.91 to $4.98, representing a 1.5% to 3% increase from $4.84 in EPS in 2022.
The update is due to planned investments to support long-term growth, such as smoke-free product research. Management also said the external environment remains "dynamic," with risks from high inflation and rising interest rates.
NYSE: MO
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What's next for Altria
Most investors own Altria for its high dividend yield, which now sits at 10% after today's decline. While the guidance cut doesn't impact the dividend, it could reduce its next dividend hike as the company aims to pay a dividend equal to 80% of adjusted EPS, which is where the dividend sits today.
The company just raised its dividend in August, so the next increase is unlikely to come for close to a year. Dividend investors may want to take advantage of the sell-off and scoop up shares at a 10% yield.
