UBS Looks At The Good And Bad From Altria's Q2

Cigarette company Altria Group Inc MO reported second-quarter results that showed mixed trends, according to UBS.

The Analyst

UBS analyst Robert Rampton maintains a Neutral rating on Altria with a $52 price target.

The Thesis

Altria's quarter was highlighted by better-than-expected reported volumes but worse than expected underlying trends, Rampton wrote in a note. Specifically, smokeable stick volumes rose 40 basis points from last year versus expectations of negative 1.7%. However, volumes adjusted for inventory was down 7% in the quarter versus the industry, which declined 6% as a whole.

Management estimated industry volumes were down 6% on an underlying basis and management revised its full-year volumes decline guidance from negative 4%-5% to a new range of negative 5%-6%. Beyond the current year, management now expects the annual average rate of domestic cigarette industry volume to decline by 4%-6% versus a prior guidance range of 4%-5%.

Consistent with a prior view, the analyst said the core tobacco business is unlikely to achieve Altria's 7% to 9% medium-term compounded annual growth rate guidance. This adds pressure for the JUUL business to perform well to make up the difference.

Price Action

Shares of Altria were trading lower by 4% Tuesday afternoon at $48.26.

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