Altria Earnings Preview

 | Apr 22, 2014 | 10:50 AM EDT
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Altria (MO) is set to report earnings Thursday, April 24, before the opening bell. The consensus earnings estimate is for $0.57 per share on revenue of $4 billion for the first quarter compared with $0.54 per share and $4 billion a year ago.

Last week, Philip Morris International (PM) reported earnings that beat the consensus estimates (after adjusting for currency fluctuations), but was slightly light on revenue. Also, it reported declining cigarette volume shipment.

I am inclined to follow the consensus estimate for the quarter for Altria, but there are a few things to keep in mind. The first quarter has typically shown weaker results for its business and this year three factors might add to the weakness.

First, and you may have guessed this one, is the -- I know everyone is trotting this excuse out for a lap or two around the track. But the truth is that if you can't get out of the house, you can't buy the product, so the company ships less to the stores that sell it.

Second, the e-cigarette market has been gaining momentum (although still a minor player by comparison) and this could affect both revenue and volume shipped. Altria is entering the e-cigarette market through its MarkTen e-cigarette, but that is just rolling out now in the second quarter. This could eventually offset any loses to the traditional cigarette market and potentially be a major factor in Altria's future.

Finally, Colorado made smoking marijuana legal as of Jan. 1, and this could have a slight negative effect on the top line for tobacco companies. A study from 2011 indicates that only about 25% of marijuana smokers also use tobacco products, but if those 25% smoke less tobacco, that could make the difference of missing on the bottom line.

As of the close of trading Monday, Altria is priced at $38.42, only $0.16 from its all-time high. If all the numbers are good for the quarter, you could see the stock push through $40 a share. Any misstep and the shares could easily fall back to $35.50. There should be major support around $33 where the stock would then be yielding 5.8%.

I would not be looking to buy any more or establish a long position here before the release of results, but I would use any pullback as an opportunity to add to your position in this great dividend machine.

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