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Shares of cigarette manufacturer Altria Group Inc. (MO - Analyst Report) hit a new 52-week high of $40.24 on Apr 29, recording a healthy year to date return of 9.9%. Share prices soared on the back of solid first-quarter 2014 results, positive outlook for fiscal 2014 and the company’s recent investment in the e-cigarette category.

Solid First-Quarter Performance

Altria’s first-quarter earnings of 57 cents were up 5.6% from the prior-year quarter on the back of higher pricing and strong performance of the core tobacco business and leading premium brands. Earnings were in line with the Zacks Consensus Estimate.

Though the top line missed the Zacks Consensus estimate, positive pricing, lower share count owing to share buyback program and lower interest expense boosted earnings in the quarter.

All the business segments of the tobacco maker reported higher year-over-year operating income backed by higher pricing and cost reduction initiatives.

Altria expects its business momentum to continue throughout the year and earnings in the range of $2.52 to $2.59, up 6% to 9% from $2.38 in 2013. The Marlboro owner expects earnings to benefit from reduction in interest expense, effective tax rate and share count due to the current share buyback program.

Investors are also encouraged by the company’s attempt to strengthen its presence in the growing e-cigarette category. In April, 2014 Altria’s subsidiary Nu Mark LLC acquired the e-vapor business of Green Smoke Inc. and its affiliates.

The acquisition is a strategic fit for Altria’s e-cigarette business. Moreover, the expertise, experience, supply chain, product lines and customer service of Green Smoke are expected to strengthen Altria’s presence in the category.

Other Stocks to Consider

Altria carries a Zacks Rank #3 (Hold). Better-ranked stock in the tobacco sector includes Philip Morris International Inc. (PM - Analyst Report) carrying a Zacks Rank #2 (Buy). Other stocks in the retail sector worth considering include American Apparel, Inc. (APP - Snapshot Report) and Foot Locker, Inc. (FL - Snapshot Report). Both the stocks carry a Zacks Rank #2.

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