Altria Group Inc (NYSE:MO, ETR:PHM7) shares fell almost 5% after the tobacco alcohol and cannabis conglomerate’s second quarter earnings disappointed on waning cigarette demand.
The owner of Marlboro-maker Philip Morris posted revenue of $5.2 billion, short of estimates of $5.4 billion.
Earnings per share were $1.31, $0.03 below the $1.34 expected.
Cigarette volumes fell 13%, more than the 9.8% decline analysts had been expecting.
A bright spot was pricing which grew 9.9%, above expectations of 8.4%.
Analysts at Jefferies wrote in a note to clients that Altria’s headline delivery in its Q2 print “did not look great,” with weakness driven by continued declines in cigarette volumes.
“Although this appears to be worsening versus getting better anytime soon, we think the market appreciates this and that it’s in the price,” they wrote.
Analysts highlighted several positives, including that downtrading traction has stalled while price gap widening has paused, cigarette pricing is strong, and margins are back in positive territory.
Further, it has gained share in reduced-risk products, with both pouch and vape trends accelerating.
“Given these dynamics, the increase to the bottom of the guide, and the broader sector strength, we would not be surprised if the stock is up today,” the bank’s analysts wrote.
As such, they repeated their ‘Buy’ rating on Altria and $53 price target.
Shares of Altria traded down 4.9% at $48 shortly after Wednesday’s opening bell in New York.