Shares of Altria Group fell last week, as the tobacco company predicted steeper declines for cigarettes in coming years.
The Richmond, Virginia-based company reported second-quarter earnings of roughly $2 billion, or $1.07 per share. Earnings, adjusted for asset impairment costs and non-recurring costs, were $1.10 per share.
The results matched Wall Street expectations, according to analysts surveyed by Zacks Investment Research.
But company executives forecast a bigger drop for cigarette demand in years ahead, with annual volume declines between 4% and 6% through 2023. That’s slightly greater than previous expectations of 4% to 5%.
Altria shares fell $1.81, or 3.6%, to $48.50 last Tuesday.
Altria, the maker of Marlboro cigarettes and Copenhagen chew, has been working to shift its business away from traditional tobacco products amid steady declines. The smoking rate has been falling for decades amid smoking bans, higher taxes and public health efforts urging smokers to quit and discouraging young people from ever starting.
In April the company won federal approval in the U.S. to sell its heat-not-burn cigarette alternative, IQOS, which will go on sale in September. The company has also bought a 35% stake in the vaping juggernaut Juul, which has come under scrutiny for its popularity with teenagers.
Altria CEO Howard Willard said some of the declines in cigarettes are due to more smokers switching to Juul and other electronic cigarettes, battery-powered devices that vaporize a flavoured nicotine solution.
“We believe this reflects both increased availability of satisfying e-vapour products that began mid-year 2018 and higher levels of exclusive e-vapour use,” Willard told analysts.
The owner of Philip Morris USA, the nation’s largest cigarette maker, said revenue increased 5% to $6.62 billion, mainly driven by higher prices. Its adjusted revenue was $5.19 billion, topping Street forecasts. Five analysts surveyed by Zacks expected $5.05 billion.
The company reaffirmed its full-year earnings in the range of $4.15 to $4.27 per share.