The stock market merry-go-round has been the ride that just won't end. Lately, though, Altria
However, first-quarter results, while good, may signal that Altria may be coming back to earth in the short term.
Yes, the quarterly EPS of $0.44 was in-line with analysts' estimates. And the year-over-year EPS growth of 4.8% is nothing to sneeze at, especially since net revenue dropped by 2% and the company's investment in SABMiller (OTC BB: SBMRY.PK) delivered a net loss on quarterly results. Altria is definitely managing itself well, delivering a 3.9% reduction in cost of goods sold and a 7.6% increase in operating income for the quarter.
OK, so now for the bad news. Altria's cigarette volume was down 6.4% for the quarter, with a 5.7% decline in Marlboro volume and 13.5% drop in discount cigarette volume. For a declining industry such as tobacco, losing volume isn't a surprise, but giving up market share is a blow, and Altria lost market share all around this quarter. Overall cigarette market share was down by 1.2 points, with Marlboro giving up 0.5 points and discount cigarettes dropping by 0.4 points.
Compare those results with last quarter, when cigarette shipment volume was down by 7% but Marlboro market share was up by 0.6 points, and you can see there's a bit of concern for the future. Altria says that some of the decline was due to the timing of product launches, but I'll be interested to see if Marlboro can retain its top-notch status even with the economic uncertainty that we're facing.
Maybe more telling, though, the company stalled its one-year, $1 billion stock repurchase program and did not buy back any shares in the first quarter. This could mean that Altria's leadership team believes that the stock is overpriced (after all, the price is up more than 20% over the past year), or it could mean that the executive team is saving up for more rainy days to come. I'm thinking that it's the latter, with balance sheet cash up by $1.1 billion in the last three months.
Reynolds American
Altria's dividends continue to grow and the stock price has definitely blossomed lately, so all is not lost for investors. However, I'd keep an eye on results (especially market share) before plunking down any more cash into Altria in the near term.