On January 10, 2013, we reiterated our Neutral recommendation
) following in-line third-quarter 2012 earnings results and the
rising share of its flagship brand Marlboro.
Why the Reiteration?
Altria delivered adjusted earnings of $0.58 per share in the
third quarter of 2012, which was in-line with the Zacks Consensus
Estimate. The earnings exceeded the 56 cents reported in the
year-ago quarter by 3.6%.
Total revenue was up 2.2% year over year to $6.2 billion in
the third quarter 2012 on the back of strong revenue growth from
smokeable products. Revenues net of excise taxes increased 3.2%
to $4.5 billion for the period.
In the quarter, gross profit increased 1.6% from the year-ago
quarter to $2.48 billion. Operating income increased 3.2% year
over year to $1.99 billion.
Altria has a strong brand portfolio of tobacco and wine
products. Its portfolio is enriched with popular names like
Marlboro, Virginia Slims, Copenhagen, Skoal, Chateau Ste.
Michelle and Columbia Crest.
Marlboro continues to provide an edge over competitors.
Marlboro has maintained its major market share for several years
as the company kept up a high level of innovation to suit
consumer tastes and preferences.
Moreover, Altria enriches the brand with continuous
innovations and aggressive promotions. Earlier in fiscal 2012,
the company introduced Marlboro's brand architecture that focused
on the modern and innovative lines of The Marlboro Gold family,
Marlboro Green family and Marlboro Black family. Moreover, Altria
has many new projects for Marlboro in its pipeline. In 2013,
Marlboro will expand its distribution of newer varieties like
Marlboro Southern Cut and Marlboro NXT.
We are also encouraged by the company's efforts to adapt to
the evolving needs of consumers and develop less harmful
non-combustible-nicotine-containing tobacco products. There has
been a general shift of consumers to low risk and smokeless
However, we are concerned about the rising restrictions on
tobacco companies by governments around the world that are taking
measures to reduce smoking. This, in turn, is intensifying the
decline in cigarette consumption across the world. The Food and
Drug Administration (FDA) in America has passed a ruling that
will compel tobacco companies to use scary labels on the
cigarette packets to discourage customers from smoking.
Moreover, the unfavorable excise tax environment is inflating
the prices of Altria's premium brands. Higher taxes compel the
company to raise prices, which eventually widens the price gap
between premium and low-priced cigarettes.
Other Stocks to Consider
Currently, Altria has a Zacks Rank #2 (Buy). Other stocks
worth a look are
Reynolds American Inc.
), both of which carry a Zacks Rank #2 (Buy).
LORILLARD CO (LO): Free Stock Analysis Report
ALTRIA GROUP (MO): Free Stock Analysis Report
REYNOLDS AMER (RAI): Free Stock Analysis
To read this article on Zacks.com click here.