Why Altria’s Stock Fell despite Beating 2Q17 Revenue Estimates



2Q17 performance

Altria Group (MO) announced its 2Q17 earnings on July 27, 2017. The company has posted EPS (earnings per share) of $1.03 on revenues, net of excise taxes, of $5.07 billion. The company’s adjusted EPS stood at $0.85, which represents a growth of 4.9% from $0.81 in 2Q16. The company’s net revenue grew 3.8% year-over-year.

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Stock performance

Analysts were expecting the company to post adjusted EPS of $0.86 on revenues of $4.90 million. During the company’s earnings call, the company management also announced the expansion of its share repurchase program from $3 billion to $4 billion. The better-than-expected 2Q17 revenue and the announcement of the expansion of its share repurchase program rose Altria’s stock 3.1% on July 27.

However, on July 28, the Food and Drug Administration (FDA) announced that it would work on lowering nicotine to non-addictive levels in cigarettes. This announcement led to a fall in Altria’s stock price. By the end of July 28, the company was trading at $66.94, which represents a fall of 9.5% from the previous day’s closing price. On the same day, stock prices for Altria’s peers British American Tobacco (BTI) fell 7.0% while the stock price for Philip Morris International (PM) rose 0.3%. Philip Morris markets its products outside the United States, so the announcement had no adverse impact on its stock price.

Year-to-date performance

Since the beginning of 2017, Altria’s stock price has fallen 1.0%. During the same period, the stock prices for British American Tobacco and Philip Morris International has risen 29.5% and 15.2%, respectively.

Notably, the broader comparative indices, the S&P 500 (SPX) and the First Trust Morningstar Dividend Leaders Index Fund (FDL), have returned 10.5% and 2.5% year-to-date, respectively.

Series overview

In this series, we’ll look at Altria’s 2Q17 earnings call and its performance on key metrics during the quarter. We’ll also cover management’s 2017 guidance and analysts estimates for the next four quarters. We’ll wrap up this series by looking at Altria’s valuation multiple and analysts’ recommendations.

First, let’s start by looking at Altria’s 2Q17 revenue.


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