As of August 23, 2017, Altria Group (MO) was trading at $63.71, which represents a fall of 11.2% since the announcement of its 2Q17 earnings on July 27, 2017.
For 2Q17, analysts were expecting Altria to post EPS (earnings per share) of $0.86 on revenues, net of excise tax, of $4.9 million. The company recorded adjusted EPS of $0.85 on revenues of $5.1 billion. Despite the company outperforming analyst estimates, the stock price fell due to the FDA’s (Food and Drug Administration) announcement on July 28, 2017, that it’s planning to reduce the nicotine levels in cigarettes to non-addiction levels. Investors are expecting a fall in smoking rates, which could lower the company’s earnings in the future.
2017 has been a tough year for Altria. The stock has fallen 5.8% since the beginning of 2017. During the same period, Altria’s peers Philip Morris International (PM) and British American Tobacco (BTI) have returned 26.2% and 89.2%, respectively.
The broader comparative indexes, the S&P 500 Index (SPX) and the Vanguard Consumer Staples ETF (VDC) have returned 9.2% and 5.5%, respectively. VDC has invested 14.2% of its holdings in tobacco and cigarette companies.
In this series, we’ll look at analysts’ revenue and earnings per share expectations for the next four quarters. We will also cover management guidance for 2017. Finally, we’ll wrap this series up by looking at Altria’s valuation multiple and analysts’ recommendations.
First, we’ll look at analysts’ revenue expectations.