Sunday , April 11 2021

Alteria: Who's Who Smokes Smoke, Ernest Review – Altria Group, Inc. (NYSE: MO)

When the last time Altria Group, Inc. was included. (MO), the huge estimate prompted us for the first time in the "weak bulls" camp. We specifically noted:

Altria lost $ 36 billion of market capitalization from November 2018. This loss is probably underestimated, since the redemption probably reduced the number of participation. Loss of the value of the company is overstated here because the debt associated with JUL is not in the books. Even accounting for that, a fair piece is knocked out. At this point the stock seems to have moved into the category "weak buy" for us and is discounting more risks than they are even present. The actual enrollment could be a catalyst for the bottom, though.

The MOD delivered a smoking rally from that point and made a line for a period of one year to 32%. Unfortunately, it changed very quickly with the release of the results of Q1-2019.

TableData from YCharts

Today, we brush through the rubble to see if the stock still remains bought. But in order to understand our thought process, you first need to understand …

Why were we only benevolent when everyone else "slammed the table"

Alteria has been descending for some time.

TableData from YCharts

We did not jump to the initial downs because we thought there were some significant risks in the stock. We specifically noted in our article "Altria: Tipping Point" that:

We also believe that Alteria now reaches the point of overturning, where there will be a difficult time to compensate for volume reduction. Shown below, we can see that Altria has avoided the impact of reducing the volume of sales through fairly exciting price increases that have far outpaced inflation.

One thing to remember is that a 1% percentage drop in smoking population from 40% to 39% eroded 2.5% of revenue. The same 1% decline from 13% to 12% will destroy 7.6% of revenue. The conventional countermeasures of Altria to raise prices will have to work double the time to influence the revenue increase. Will you succeed? In our opinion, it is likely to come to the point of persuading the remaining smokers to give up even faster.

We were also not too thrilled by the acquisition of JUUL and we thought that Altiria was overpaid for at least one factor 3. Generally, our softness of sales is decreasing and the big wrong step by the management of JUUL has opposed our bullish attitude towards ransom and big dividends. This is what left us mildly bullish at $ 43 / share when we wrote the article.

What Q1-2019 brought

The revenue of Altria has declined by a pretty staggering 6% year on year.

Source: press release Altria Q1-2019

While that number was bad, cigarettes sold the number, which removes the impact of chronic increases in prices for Alteria, was a complete disaster.

Source: press release Altria Q1-2019

Alteria tried to soften the slide stroke which shows that the changes in the trade inventory contributed to a good part of the fall, but investors did not lose the supplies of the base industry dropped by 5%, and Altiria lost its market share.

Source: presentation of Alteria Q1-2019

Altria's total numbers were rescued by the big increases in prices the company has spent over the past 12 months.

Source: presentation of Alteria Q1-2019

But bulls recovered, as the adjusted EPS fell by 5.3%.

To sum up, "Alteria" raised prices by 8.2%, redeemed 1.3% of outstanding stocks and the EPS has still decreased by 5.3%. That said, the company confirmed its annual guidance of 4.17 to 4.25 dollars, which could cheer bulls.

The discovery of JUL is not a matter of faith, a matter of time

Julius had a good quarter in terms of expanding abroad.

Source: presentation of Alteria Q1-2019

However, domestic growth has slowed down a lot.

Source: presentation of Alteria Q1-2019

Yes, activities to prevent access to youth have reduced growth, and if Althria thinks it ends here, it is deeply wrong. In our opinion, the legislation will hit that company from every angle until that growth rate crosses, because the alternative is to have a full epidemic of JUL dependence that leads to a smoking epidemic along the line. What do we want to say with that? Well, the secret is that JUL makes teenagers fall asleep on the line. The most comprehensive study on this issue shows an approximately 400% increase in regular smoking in e-cigarette smokers in the future, compared to those who did not try to emit cigarettes.

Among 17 389 adolescents and young adults, the age ranges between 14 and 30 years in the initial state, and 56.0% are women. The aggregate probabilities for the initiation of cigarette smoking were 30.4% for primary users of e-cigarettes and 7.9% for e-cigarette users who were not basic. The aggregate probabilities of past 30-day cigarette smoking during follow-up were 21.5% for the primary 30-day e-cigarette users and 4.6% for primary users of e-cigarettes who were not 30-day. Adjustment of known demographic, psychosocial and cigarette smoking factors, the ratio of united chance to initiate cigarette smoking was 3.62 (95% CI, 2.42-5.41) for repeatedly against e-cigarette users and the ratio of aggregate coefficients to past 30-day cigarette smoking during monitoring was 4.28 (95% CI, 2.52-7.27) for past 30-day e-cigarettes versus 30-day e-cigarette users in their initial state. Moderate levels of heterogeneity were observed in studies (I2 = 60.1%).

The use of e-cigarettes was associated with a greater risk of initiating cigarette smoking and past 30-day cigarette smoking. Strong regulation of e-cigarettes could potentially prevent the use of young people and limit the future burden of cigarette smoking in the future population. "

The article was published in JAMA Pediatrics, which is not only good, it is a gold standard.

According to Reports for quoting newspapers, the magazine's impact factor in 2017 is 10,769, ranking it 1 of 124 magazines in the category "Pediatrics".

The study was conducted using approximately 18,000 people across several cutting-edge research universities across the United States.

So, science is not at stake and lawmakers strive for full steam ahead.

California will become the nation's first nation to ban the sale of flavored tobacco products, including the taste of Juul nicotine popular among teens with mango and mint if the proposed legislation proposed by legislators on Wednesday becomes law.

The Senate Health Committee has adopted SB38, which will ban retail shops and vending machines from selling flavored tobacco, including nicotine cartridges that boost the smell and taste of candy, dessert and fruit.

After sales are slow enough and data available, Altria is likely to spend multi-million dollar borrowing to buy a company in 36X sales, just as the growth rate was top.

Who smokes smoke

Alteria predicts a nice 4-5% annual drop in cigarettes.

Source: presentation of Alteria Q1-2019

To keep EPS, Altria will have to raise prices by at least 7% per year. We already see volumes of feedback, and the company continues to miss the 7-missed instructions in the last 10 quarters.

Source: Seek Alpha, The Source of All Good Things in Finance


We degrade this to keep it based on the available information. While other investors are thrilled by the great future sources of income from cannabis and JUL, we think that they will not move the needle at all in the near future. One thing that can save the bull's bull is if the legislation of JUUL fails to slow down sales. In that case, we will have a much higher percentage of teenagers who will regularly smoke along the line, which will eventually help the case of Alteria.

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Publishing: I / we do not have positions in the mentioned shares and we have no plans to initiate positions in the next 72 hours. I myself wrote this article, and expressed my opinion. I do not receive compensation for this (except from the Alpha Request). I have no business relationship with any company whose shares are mentioned in this article.

Additional detection: Note that this is not a financial advice. It may look like this, it sounds like that, but surprisingly, it's not. Investors are expected to make their own analysis and to consult with a professional who knows their goals and limitations.


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