Altria (MO) on April 28 reported first-quarter earnings per share that beat expectations. But revenue missed. So should you buy MO stock now?
The company, best known for selling Marlboro cigarettes in the U.S., earned $1.12 per share, above estimates for $1.09. Sales of $4.819 billion just missed estimates for $4.876 billion.
Altria stuck with its full-year earnings-per-share outlook of $4.79 to $4.93. Wall Street expects full-year earnings per share of $4.83.
Altria, during its conference call, said that the spike in omicron cases earlier this year briefly interrupted customers’ purchasing routines. But it said rising prices — including for gas, which has been driven higher by Russia’s war in Ukraine — were offset by rising wages and higher tax refunds.
“For some occupations, wage growth outpaced inflation, including occupations that over-index toward tobacco consumers,” CEO Billy Gifford said. Those jobs, he said, included work in production and transportation.
MO Stock And Regulations
The results from Altria arrived the same day that the FDA proposed rules prohibiting menthol cigarettes and flavored cigars. The rules, the agency said, would prevent children from picking up smoking and help adults quit.
President Biden last month also signed a bill that allows the FDA to regulate synthetic nicotine, used in some vaping devices.
Gifford, during Altria’s call, said the bill allowed businesses that make synthetic nicotine products to keep products on the market for 120 days after the measures took hold, as long as they submit a premarket tobacco product application by May 14. Tobacco companies submit those applications in an effort to show the FDA that their products are healthier than traditional cigarettes.
Altria in February got some signs of possible relief over its investment in e-cigarette maker Juul, after a judge dismissed the Federal Trade Commission’s antitrust charges against the tobacco giant’s investment in the vaping startup.
Still, the FDA is increasingly asking e-cigarette manufacturers to justify their existence — scrutiny that also has big implications for Altria’s investment in the company.
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 applications demonstrating their products were healthier than traditional cigarettes. Juul’s own products await the FDA’s decision.
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.
Still, MO stock has surfaced above a long consolidation, after seesawing through much of 2021.
MO Stock, IQOS, Juul
Still, Altria’s other ventures beyond traditional cigarettes — products that attempt to heat tobacco rather than burn it — have also drawn regulators’ attention.
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).
Elsewhere, Altria has invested in Canadian cannabis company Cronos Group (CRON). Analysts have waited for more to come from that investment, as competition remains stiff in Canada’s legal marijuana market.
Altria has also faced questions about cigarette demand as people become more health conscious, even though customers clung to their smoking habits in 2020 amid the stress of the coronavirus pandemic.
MO Stock Fundamental Analysis
Analysts expect Altria’s earnings to grow 5% this year and 6% next year, according to FactSet.
Top stocks usually have solid underlying earnings growth. But overall, MO stock falls far short of the CAN SLIM benchmark for 25% growth in earnings and revenue.
Sales growth for Altria has been choppy, bouncing between single-digit percentage gains and declines over recent years.
MO Stock Technical Analysis
MO stock has risen above a long consolidation with a 52.69 entry, MarketSmith shows. Shares are currently trading at around 55.
MO stock is still not close to the highs it reached in mid-2017. The stock’s relative strength line has rebounded recently, after falling for years.
When a stock’s relative strength line goes lower, that means it’s falling behind overall compared to the S&P 500.
So Is Altria Stock A Buy?
MO stock is technically within buy range.
However, IBD recommends investors focus on stocks that are closer to their highs and that have Composite Ratings of 90 or higher.
Earnings growth for MO stock might tick higher this year. However, revenue has bounced between anemic growth and modest declines.
Follow Bill Peters on Twitter at @IBD_BPeters.
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