Altria (MO; A3 Neg, BBB Pos, BBB S) 2Q Results

The pure-play US and combustibles heavy (~86%) tobacco co is reporting some weak 2Q results; down -4.6% and -3.6% over the 1H.

• FY guidance is in the form of adj. diluted EPS - which it sees up +2.5-4% yoy.
• It's running a 40.8% EBIT margin this half, down circa 4ppts yoy. BS has historically been low levered (gross 2x) - we see debt moving down ~€1b alleviating some of the headline falls on leverage. $5.8b were paid to equity holders this half.
• We have generally exercised caution on Altria and instead preferred BAT risk (82% non-combustibles) that trades flat to it further out. It's 1H results last week were weak as well (it was blaming US) but its guiding to a pick up in 2H to leave FY guidance unch; LSD growth on revenue with DD in non-combustibles, LSD adj. EBIT growth and net leverage to be within new 2-2.5x target (2.6x in FY23).