Altria Group Inc (MO)

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MO Stock: Is Marlboro Maker Altria A Buy After Earnings?
By: Investor's Business Daily | December 9, 2021

Tobacco giant Altria (MO) in October reported third-quarter earnings that missed expectations. But the company raised the lower end of its full-year profit forecast and expanded its buyback program. So should you buy MO stock now?

Altria, best known for selling Marlboro cigarettes in the U.S., earned $1.22 per share during the quarter. That was below estimates for $1.26. Sales of $5.531 billion came in below estimates for $5.727 billion.

Altria nudged the lower end of its full-year earnings-per-share forecast upward, to a range of $4.58 to $4.62. In July, that forecast was for earnings of $4.56 to $4.62 per share. Wall Street expects earnings per share of $4.61 this year.

The tobacco-products maker also said its board had OK'd the expansion of Altria's $2 billion buyback program to $3.5 billion. Altria said it used proceeds from the sale of its Ste. Michelle Wine Estates business to help fund the expansion. Still, MO stock fell on the earnings report.

Altria's business outside of traditional cigarettes — products that attempt to heat tobacco rather than burn it, as well as its investment in e-cigarette startup Juul — has also faced increased regulatory scrutiny.

MO Stock, IQOS, Juul

The International Trade Commission ordered Altria and Philip Morris International (PM), which Altria spun off in 2008, to stop importing and selling the IQOS heating device, after the agency found the devices infringed on patents held by Reynolds American, owned by British American Tobacco (BAT).

With the FDA increasingly asking e-cigarette manufacturers to justify their existence, Altria's investment in Juul also hangs in the balance. The FDA is trying to determine whether vaping products from hundreds of companies can still be sold, after asking manufacturers of those products to submit an application showing their products were healthier than traditional cigarettes.

Juul's own products await the FDA's decision. Altria in 2018 said it took a 35% stake in Juul.

But Juul's profit and sales expectations have faded. Competition and lawsuits alleging misleading health claims and efforts to target younger consumers have piled up. President Biden's Build Back Better safety-net expansion bill, passed by the House last month but faces a tough road ahead in the Senate, includes a tax on e-cigarettes.

Elsewhere, Altria has invested in Canadian cannabis company Cronos Group (CRON). Cronos Group's size in Canada remains small compared to other publicly traded marijuana stocks on U.S. exchanges. Analysts have waited for more to come from that investment.

Altria has also faced questions about cigarette demand as people become more health conscious, even though customers clung to their smoking habits last year amid the stress of the coronavirus pandemic...

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