Altria Group (MO), the domestic arm of tobacco giant Philip Morris, narrowly missed estimates Thursday morning, reporting an adjusted EPS of $0.39 on revenues of $4.1 billion. The street had been looking for EPS of $0.40 on revenues of $4.14 billion, but shares still traded up marginally for the day, a day on which the broad market slid greater than 1%. In a market that has begun selling off on blowout earnings from market leaders, the reaction to MO’s report certainly bucked the trend.
Despite the company’s 6.8% year-over-year growth in profits, cigarette sales fell 11%, ahead of the overall industry pace of 10% declines. Sales of smokeless tobacco products like Skoal and Copenhagen, which Altria took control of via its 2009 acquisition of UST, saw declines in volume as well. Considering the ever-present litigation risk and nation-wide price hikes, perhaps Altria’s relatively steady revenue projections (for the intermediate-term, at least) and robust near-7% dividend have helped attract investors as the broad market averages have begun to lose ground.
Since hitting its highs on Jan. 19th, the S&P 500 has lost 6.7%. In the same period, MO has given up only 3.8%. Moreover, while the S&P has broken both its 50-day moving average and its uptrend dating back to the March lows, MO has held both, testing and holding its 50-day MA last week.
Overall, I don’t think right now is a good time to be adding to any of your longs, but if you sorely need a place to park some capital, Altria is a safe bet to out-perform during any sustained declines.
Disclosure: No position in MO.