Altria Group Inc.
(
MO
) delivered earnings of 59 cents per share in the second quarter of
2012. The earnings surpassed the Zacks Consensus Estimate of 57
cents by two cents. It also exceeded the prior-year quarter results
by 9.3%.
The upswing in earnings came as a result of Altria's long-term
premium brand building initiatives and continued innovation.
Revenue and Margins
Altria's total revenue went up 9.6% year over year to $6.5
billion in the second quarter 2012. Revenue largely exceeded the
Zacks Consensus Estimate of $4.8 billion. Revenues net of excise
taxes increased 14.4% to $4.6 billion for the period.
Sales were boosted by brand building initiatives like product
developments of popular brands like Marlboro Eighty-Threes,
Copenhagen Southern Blend and Black & Mild Summer Blend.
In the quarter, gross profit increased 26.5% to $2.5 billion
compared to the prior-year quarter. Operating companies' income
shot up 42.3% year over year to $1.9 billion compared with
$1.4 billion in the year-ago period on the back of the ongoing cost
reduction program.
Segment Details
Smokeable Products Segment:
Net revenue for the Cigarettes segment went up 0.8% year over year
to $5.9 billion, primarily due to positive pricing. Revenues net of
excise tax went up by 1.4% to $4.0 billion.
Furthermore, the adjusted operating companies' income increased
2.8% year over year to $1.67 billion, reflecting higher cost
management in the company.
Shipment Volume in the quarter went up marginally by 0.1% to
36.6 billion sticks compared to the prior-year quarter, backed by a
0.1% increase in its subsidiary PM USA's cigarette shipment volume
and a 0.6% increase in Middleton's cigar volume.
Smokeless Products:
Net revenue in Smokeless Products increased 5.4% to $426 million,
fueled by higher volume and pricing. Revenues net of excise tax
went up 5.8% to $399 million.
Furthermore, adjusted operating companies' income increased 7.1%
year over year to $240 million. Smokeless products' first-quarter
shipment volume went up 7.6% to 191.7 milion units on the back of
volume growth on Copenhagen and Skoal brands.
Wine:
The segment's net revenue surged 10.3% to $128 million in the
quarter, while revenues net of excise tax went up 9.8% year over
year to $123 million.
Adjusted operating companies' income went up 15.8% to $22
million on the back of higher shipment volume, improved premium mix
and higher pricing. Wine shipment volume went up 2.1%, primarily
due to increased exports.
Financial Services:
Reported and adjusted operating income for the financial services
segment in the second quarter of 2012 increased $15 million to $42
million.
Cost Savings
In October 2011, Altria initiated a new $1 billion cost
reduction program for its tobacco and service company subsidiaries,
reflecting Altria's objective to reduce cigarette-related
infrastructure ahead of its subsidiary, Philip Morris USA Inc.'s
(PM USA) cigarette volume declines.
The new program is expected to deliver $400 million in
annualized cost savings by the end of 2013.
Share Repurchase
Altria bought back 2.0 million shares of its common stock priced
at $32.37 for a total cost of approximately $66 million during the
second quarter.
Dividend
In May 2012, Altria's board declared a regular quarterly
dividend of 41 cents per share. The current annualized dividend
rate is $1.64 per common share. As of July 23, 2012, Altria's
annualized dividend yield was 4.6%.
Other Financial Update
At the end of June 30, 2012, cash and cash equivalents were $1.5
billion versus $4.2 billion at the end of March 31, 2012. The
company had long term debt of $13.1 billion at the end of June 30,
2012 almost equal to that in the previous quarter.
Business Outlook
Following the second quarter beat, the company raised its fiscal
2012 earnings guidance from a range of$2.17 to $2.23 to a range of
$2.19 to $2.23, representing a growth rate of 7% to 9% from $2.05
per share in 2011.The company expects moderate growth of adjusted
diluted EPS in the second half of 2012.
Headquartered in Richmond, Virginia, Altria engages in the
manufacture and sale of cigarettes, smokeless products, and wine in
the United States and internationally. Altria, which competes with
Reynolds American Inc.
(
RAI
) and
Lorillard, Inc.
(
LO
), currently has a Zacks #3 Rank, which implies a short-term Hold
rating on the stock. For the long-term, we have a Neutral rating on
the stock.
LORILLARD CO (LO): Free Stock Analysis Report
ALTRIA GROUP (MO): Free Stock Analysis Report
REYNOLDS AMER (RAI): Free Stock Analysis Report
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