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Altria’s Stock Price Falls on Weak Cigarette Shipment Volume

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1Q18 performance

Altria Group (MO) posted its 1Q18 earnings before the market opened yesterday. The company posted adjusted EPS (earnings per share) of $0.95 on revenues, net of excise taxes, of $4.67 billion. Compared to 1Q17, the company’s EPS grew 30.1%, while its revenue increased 1.8%.

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Stock performance

Analysts were expecting Altria to post adjusted EPS of $0.92 on revenues of $4.63 billion. Despite posting better-than-expected 1Q18 earnings, the stock price declined due to a dip in cigarette shipment volume of 4.2% during the quarter. Also, adjusting for trade inventories, the decline was even sharper, at 7.0%. By the end of April 26, Altria was trading at $54.77, which represents a fall of 1.9% from its previous-day closing price.

Year-to-date performance

In 2017, Altria’s stock price had returned 5.6%. However, since the beginning of 2018, the company has been struggling with its stock price declining 23.3%. The FDA’s announcements that it’s focusing on developing a comprehensive policy framework to lower nicotine levels in cigarettes and restrict the use of flavors in tobacco products have hurt the company’s stock price.

The stock prices of peers Philip Morris International (PM) and British American Tobacco (BTI) have declined 22.9% and 17.5%, year-t0-date, respectively. Also, the broader comparative indices, the S&P 500 Index (SPX) and the Consumer Staples Select Sector SPDR ETF (XLP), have returned -0.2% and -11.2%, respectively.

Series overview

In this series, we’ll look at Altria’s 1Q18 performance by comparing it with analysts’ estimates. We’ll also cover management’s guidance for 2018 and analysts’ expectations for the next four quarters. Finally, we’ll end this series by looking at the company’s valuation multiple and analysts’ recommendations.

Let’s start our analysis by looking at Altria’s 1Q18 revenue.

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