Altria Group (MO) posted its third-quarter earnings before the market opened on October 25. It reported adjusted EPS of $1.08 on revenues (net of excise tax) of $5.29 billion. Year-over-year, its revenues increased 3.3%, and its adjusted EPS rose 20%.
In the third quarter, Altria outperformed analysts’ EPS expectation of $1.07 and revenue expectation of $5.22 billion.
In September, the FDA stated that the use of flavored e-cigarettes among youth has reached epidemic proportions. It asked five e-cigarette manufacturers, including Altria, to submit plans to restrict the use of e-cigarettes by minors.
In response, Altria’s management announced that Nu-Mark would remove MarkTen Elite and Apex by MarkTen pod-based products from the market. It announced that Nu-Mark will sell only tobacco, menthol, and mint flavors of MarkTen and Green Smoke cig-a-like products and discontinue sales of all other flavors until the FDA issues a market order.
The growing popularity of e-cigarettes has a negative impact on cigarette sales. The e-cigarette market is dominated by JUUL with 72% of the market share as of mid-August, according to Wells Fargo analyst Bonnie Herzog. Sales of e-cigarettes are a tiny percentage of Altria’s sales.
Investors hope the company’s announcement to discontinue some of its e-vapor products in support of the FDA’s request will also lower the competition of e-cigarettes on Altria’s smokable product segment. Altria stock rose to a high of $63.84 on October 25 before closing the day at $63.16, which was a 1.4% rise from its previous day’s closing price.
YTD (year-to-date), Altria stock is trading 11.6% lower. Philip Morris International (PM) and British American Tobacco (BTI) have fallen 14.2% and 31.1%, respectively, YTD. The broader comparative index, the Consumer Staples Select Sector SPDR ETF (XLP), which has invested 12.9% of its portfolio in cigarettes and tobacco companies, has declined 3.6% YTD.
Next, let’s look at Altria’s third-quarter revenue.