Shares of Altria (MO -0.37%), 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.
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.
