Altria Earnings: We See Upside as Shares Are Down 3% on Elevated Cigarette Volume Declines

Wide-moat Altria’s second-quarter results sent shares down about 3.5%, but we think the reaction is a bit overdone. Cigarette volumes declined 13%, with price increases muting the impact on smokeable products' net revenue to just a 6% decline. However, Altria’s first-half 11.5% decline in cigarette volume was better than the 13.7% decline in combustibles volume that British American Tobacco reported for its US segment. This indicates that pressure is industrywide and that Altria’s market-leading Marlboro brand still carries relatively strong pricing power.