Should investors treat sell-offs on this high-yield dividend stock as a buying opportunity?
The stock of Altria (MO -3.05%) was losing ground Wednesday following the tobacco company’s recent quarterly report. Its share price was down 4.3% as of 12:30 p.m. ET today, according to data from S&P Global Market Intelligence.
Before the market opened this morning, Altria published second-quarter results that fell short of the market’s expectations. The business posted adjusted earnings of $1.31 per share on sales of $5.28 billion after backing out excise taxes, falling short of the average analyst estimate’s call for per-share earnings of $1.34 and sales of $5.39 billion.
Declining cigarette volumes continue to weigh on Altria
Altria’s revenue net of excise taxes fell 4% year over year in the second quarter. While the company’s oral-tobacco segment saw adjusted sales increase 5% year over year to $687 million, revenue from the core smokable-products segment continued to sag.
Due to ongoing declines for cigarette volume sales, adjusted revenue for the smokable segment fell 4% to roughly $4.59 billion. Even though the company was able to brunt much of the impact through price increases, unit volumes for cigarettes declined 13% compared to the prior-year period.
Is the pullback on Altria stock a buying opportunity?
For the full year, Altria now expects adjusted earnings per share (EPS) to come in between $5.07 and $5.15, suggesting annual growth between 2.5% and 4%. Management had previously targeted that EPS would come in between $5.05 and $5.17, so the new target suggests both a higher floor and lower ceiling for profits. The company expects that earnings growth will primarily be driven by performance in the second half of this year.
MO PE ratio (forward) data by YCharts; PE = price to earnings.
With today’s pullback, Altria now trades at roughly 9.5 times this year’s expected earnings and has an 8.1% dividend yield. For investors seeking defensive stocks with strong dividend profiles, it looks like a worthwhile portfolio addition.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
