This article is part of a Real Money series on a dozen companies investors should consider adding to their watch list of so-called "vice stocks."
It's shaping up to be a good first quarter for Big Tobacco.
Shares of Altria (MO) -- the biggest cigarette producer in the U.S. -- jumped more than 1% in morning trading Thursday on news of an earnings beat and strong cigarette shipments.
The company attributed much of its better-than-expected cigarette sales to low gas prices, which have put more disposable income in the pockets of smokers.
Altria reported adjusted earnings per share of $0.72 for the quarter, toping Wall Street forecasts by around 5%, while sales of $4.5 billion beat analyst estimates by nearly 3%, based on Bloomberg consensus data.
Growth has been accelerating across Altria's top cigarette labels, including Marlboro -- the best-selling cigarette in the country for the past 40 years -- as well as in its smokeless tobacco products, including Copenhagen and Skoal brands. Overall, Altria's smokeable sales increased more than 1% on the previous year and revenue in its smokeless products jumped nearly 8%.
"Once again, Copenhagen was both the fastest-growing smokeless brand and the largest, growing its retail share by 1.1 percentage points to 32.4%," Altria CEO Martin Barrington said on the company's Thursday earnings call with analysts.
Altria paid out about $1.1 billion in dividends and repurchased $168 million in shares in the first quarter. "We continue to make returning cash to shareholders a priority," Altria CFO William Gifford said on the call, noting the company is expecting to repurchase nearly $800 million in additional shares by the end of 2016.
The company also reaffirmed its prior guidance for annual earnings per share of $3.00 to $3.05 for 2016.
Shares of Altria -- which is a member of Real Money's "Vice Squad" watch list, along with Philip Morris (PM) and Reynolds (RAI) -- are up more than 20% over the past 12 months.
"While investors may be disappointed that MO didn't raise guidance, we think MO guidance remains conservative and recommend investors buy the stock," Wells Fargo Securities analyst Bonnie Herzog said in a Thursday investment note. "We reiterate our Outperform rating on MO, and continue to view the company as best in class."
Real Money's Vice Squad Watch List
- Diageo (DEO)
- Molson Coors (TAP)
- Constellation Brands (STZ)
- Reynolds (RAI)
- Altria Group (MO)
- Philip Morris (PM)
- Vista Outdoors (VSTO)
- Smith & Wesson (SWHC)
- Sturm Ruger (RGR)
- Wynn Resorts (WYNN)
- Churchill Downs (CHDN)
- Las Vegas Sands (LVS)