Marlboro owner Altria Group Inc (NYSE:MO, ETR:PHM7) saw its shares trade flat after posting first-quarter results which analysts argued were “hard to get excited about”.
Analysts at Jefferies disregarded the group’s financials despite revenues of US$4.17 billion topping Wall Street guidance of US$4.712 billion, while adjusted earnings per share came in line with forecasts at US$1.15.
Instead, the US bank has lasered in on the weakness of both its combustible and reduced risk products (RRP) as cause for concerns.
For the combustible division, which covers traditional smoking products, volumes slipped by around 10%, a sharper drop than the market forecast and lower than industry averages.
Jefferies also believes a slip in margins, down 146 basis points compared to guidance of an 82 basis point drop, could “cause some concern”.
In the group’s RRP division, analysts at the bank also noted that NJOY, the e-cigarette and vape brand, had suffered a drop in volumes quarter-on-quarter.
It comes despite the group upping its spending in the division and highlights the effects of the illegal vaping market.
“The key take here is that it is clear that illegal vape continues to have an oversized impact on both cigarettes and legal vape,” Jefferies said.
“We continue to see action on illegal disposables as a significant catalyst to re-rating.”
Jefferies maintains its “Buy” rating for Altria and targets a US$47 price target, which represents around 10% premium to its current market value.