Altria Group Inc (NYSE: MO) stock fell over 6.4% on 25th April, 2019 (As of 1:00 pm GMT-4; Source: Google finance) after the company’s first-quarter adjusted diluted EPS declined in the mid-single digit range as MO incurred higher interest expense as a result of the recently issued debt, without the full benefit of savings from the company’s cost reduction program, which began to ramp up at the end of the quarter.
Moreover, in December 2018, Altria announced a cost reduction program that it expects to deliver approximately $575 million in annualized cost savings by the end of 2019 (Cost Reduction Program). The program includes, among other things, third-party spending reductions across Altria’s businesses and workforce reductions.
MO in the first quarter of FY 19 has reported the adjusted earnings per share of 90 cents, missing the analysts’ estimates for the adjusted earnings per share of 92 cents. The company had reported the adjusted revenue of $4.39 billion in the first quarter of FY 19, missing the analysts’ estimates for revenue of $454 billion.
Altria repurchased 2.7 million shares in the first quarter at an average price of $56.34 per share, for a cost of $151 million. As of March 31, 2019, Altria had $195 million remaining in the current $2 billion share repurchase program, which Altria expects to complete by the end of the second quarter of 2019. Further, Altria’s current annualized dividend rate is $3.20 per share, representing an annualized dividend yield of 5.9% as of April 22, 2019. Altria paid $1.5 billion in dividends in the first quarter of 2019.
Meanwhile, Altria has completed its investment of $1.8 billion (CAD $2.4 billion) in Cronos. Altria’s investment represents a 45% economic and voting interest in Cronos with a warrant, if exercised in full, to acquire an additional 10% equity stake. Additionally, Altria has issued $16.3 billion of debt in the form of senior unsecured notes in the European and U.S. markets. Altria used the net proceeds to repay the term loan that it used to fund the JUUL investment, to fund the Cronos investment and for other general corporate purposes.
In addition, Altria filed its Hart-Scott-Rodino (HSR) notification with the U.S. Federal Trade Commission (FTC) in the first quarter related to the proposed conversion of its interest in JUUL to voting securities pursuant to the terms of its investment. In April, Altria received a request for additional information and documents from the FTC relating to its HSR filing.