Altria and Philip Morris' stocks fall with BAT after news of huge write-down
By Ciara Linnane
The stocks of the two big U.S. tobacco companies were down more than 3% on Wednesday
Altria Group Inc. and Philip Morris International Inc. shares fell more than 3% Wednesday, caught up in the downdraft created by British American Tobacco's massive $31.5 billion write-down of its cigarette brands.
BAT's stock (UK:BATS) was down 10% in London after it announced the write-down, which covers its acquired U.S. combustibles brands, as it assesses their value over 30 years.
U.S. brands held include Camel and Newport. According to data from Calcbench, it's the largest write-down of a U.S.-listed company since AOL's $35.6 billion write-off in 2014.
The company told analysts on a call that its 2023 earnings per share will be in line with previous guidance on low-end organic revenue growth, and said its U.S. business next year will be hit by macroeconomic pressures on the combustibles market as well as competing demand from illicit disposable vape.
Chief Executive Tadeu Marroco repeatedly called for tougher Food and Drug Administration enforcement that he doesn't expect to occur.
See also: Organigram's stock soars as British American Tobacco invests $91.3 million
Altria's stock (MO) tumbled 3.2%, while Philip Morris (PM) was down 3.6%.
Jefferies analyst Owen Bennett said that while BAT's business is clearly under pressure, "post call there are reasons not to be too negative."
Bennett pointed to possible upside from the U.S. next year, and noted that both the vape & pouch businesses are profitable already, even with the disposable pressures on the former. Bennett said he believes that a plan to invest more in heated products is needed.
"We've said before, the focus on pricing vs below-the-line has been wrong," he wrote, referring to BAT's decision to go to market with a focus on pricing and not on spending on items such as consumer education.
"Philip Morris, by contrast, has been very much focused on the latter. BAT's approach works in a cigarette world, but not with RRP (reduced risk products), where education to drive conversion over trial is critical," said Bennett.
BAT also seems open to part of its stake in Imperial Tobacco Company of India, or ITC, which could free money up for share buybacks, said the analyst.
Jefferies has a buy rating on BAT's stock.
Altria's stock has fallen 10% in the year to date, while Philip Morris has fallen 11%. The S&P 500 SPX has gained 19%.
Read: Altria's adjusted earnings per share fall slightly short of estimates
-Ciara Linnane
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
12-06-23 1041ET
Copyright (c) 2023 Dow Jones & Company, Inc.-
Should Emerging-Markets Stocks Stand Alone in Your Portfolio?
-
What’s Happening in the Markets This Week
-
Worst-Performing Stock ETFs of the Quarter
-
Q3 in Review and Q4 2024 Market Outlook
-
Top-Performing Stock ETFs of the Quarter
-
September Jobs Report Forecasts Show Moderate Hiring Gains
-
Port Strike a Headache for Shippers but a Potential Tailwind for Certain US Transport Stocks
-
13 Charts on Q3′s Roller-Coaster Rally for Stocks and Bonds
-
3 Dividend Stocks for October 2024
-
Consumer Defensives: Despite Angst, Thirsty Investors Have Names to Pursue
-
Industrials: Many Stocks Overvalued After Q3 Outperformance
-
Basic Materials: Despite Index Rise, We See Multiple Long-Term Opportunities
-
What the Election Could Mean for Big Tech Stocks
-
3 Lessons From Recent Stock Market Drama
-
Consumer Cyclicals: Even Amid Moderating Consumer Spending, We See Discounts
-
Healthcare: Valuations Look Fair Overall, With Select Industries Still Undervalued