Altria (MO, $48.44) forecasts slowing cigarette volumes, and hints at uncertainty over Juul
On Tuesday, Altria Group reported second-quarter adjusted earnings that was almost in line with analysts' expectations. However, the cigarette maker warned that cigarette sales declines are worsening, and also expressed current uncertainty on Juul’s international expansion.
Excluding special items such as litigation, costs associated with Altria's investment in Anheuser-Busch InBev and its stake in Canadian cannabis producer Cronos, Altria’s earnings came in at $1.10 a share for the quarter, almost matching the consensus estimate of analysts polled by FactSet.
The company's total sales climbed +5.5% year-over-year to $5.19 billion in the quarter, surpassing analysts’ expectations of $5.09 billion.
Altria also affirmed its projection of full-year adjusted earnings of between $4.15 and $4.27 a share.
However, the company indicated that U.S. cigarette volumes would decline between -5% and -6% this year, as cigarette smokers switch to e-cigarettes. Its prior forecast of the decline was -3.5% to -5%.
Altria also revised its expectations of total domestic cigarette industry volumes decline to -4% to -6% through 2023, compared to the previously forecast range of -4% to -5%. The company feels that part of this can be attributed to 18 states raising the permissible smoking age to 21.
Apparently in a bid to capitalize on the growing e-cigarette market, Altria invested $12.8 billion last year for a 35% stake in e-cigarrette startup Juul. Altria is hoping for Juul’s international growth to boost business, but Altria CEO Howard Willard said it’s “too soon” to judge the outcome. Meanwhile, e-smoking apparently continues to face scrutiny in various parts of the world for its burgeoning popularity among teenagers.
Other recent instances of product-portfolio diversification of the Marlboro-maker include its $1.8 billion investment for a 45% stake in Canadian cannabis company Cronos earlier this year , and its $372 million spending for oral nicotine pouch brand On.
Altria will also begin selling heated tobacco product iQOS, in the U.S. this summer. Philip Morris International will license the device to Altria. The Food and Drug Administration earlier this year gave its approval on iQOS sales in the U.S.
