Why Alliance One Shares Jumped

Why Alliance One Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Alliance One International were looking stronger today, finishing up 8% after a top-notch second-quarter earnings report.

So what: The tobacco supplier said sales increased 21% to $700 million, while operating income was slightly down at $48.3 million as cost increases slightly outweighed revenue gains. Net income was much lower because of a debt retirement expense charge. Without the charge, Alliance would have had a per-share profit of $0.11 a share. CEO Pieter Sikkel said, "Volume, revenue, and core operating income are on track to exceed last year," and full-service volumes improved 10.7%.

Now what: While the revenue and volume growth were solid, Alliance still has an enormous debt burden to deal with. The company just refinanced its debt, in part issuing $735 million in loans at 9.875%, and in the past quarter interest expense ate up nearly two thirds of operating income. The new rate should help lower expenses, but interest expense figures to be a problem for the foreseeable future. Shares are certainly cheap, but they're that a way for a reason. Still, if Alliance One puts up more quarters like this, the stock should move higher.

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The article Why Alliance One Shares Jumped originally appeared on Fool.com.

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Originally published