Altria Group Inc.
(
MO
) delivered earnings of 49 cents per share in the first quarter of
2012, in line with the Zacks Consensus Estimate. However, the
quarterly earnings surpassed the year-ago results of 44 cents by
11.4%.
The upswing in earnings came as a result of long-term premium
brand building initiatives by PM USA as well as strong performance
and increased market share of the company's iconic Marlboro brand.
New products launched in the smokeless product segment also helped
drive growth in the company's top-line results.
Revenue and Margins
Altria's total revenue slipped 0.1% to $5.65 billion in the
first quarter. However, it exceeded the Zacks Consensus Estimate of
$4.0 billion, owing to higher net revenues from all the reporting
segments.
In the quarter, operating companies income increased 6.5%
year over year to $5.65 billion compared with $5.64 billion
in the year-ago period.
Segment Details
Smokeable Products Segment:
Net revenue for the Cigarettes segment went up 0.1% year over year
to $3.5 billion, primarily due to positive pricing.
Furthermore, the adjusted operating companies income ("OCI")
increased 3.9% year over year to $1.4 billion, reflecting higher
cost management in the company.
Shipment Volume in the quarter declined 2.5% from the year-ago
level due to decline in cigarette shipment, which offset the
increased volume in cigars.
Smokeless Products:
On the basis of the year-ago quarter, net revenue in the Smokeless
Products increased 0.3% to $380 million, fueled by strong
performance of Copenhagen and Skoal brands.
Furthermore, adjusted OCI increased 8.8% year over year to $211
million. Smokeless products' first-quarter shipment volume slipped
7.5% primarily due to changes in trade inventories and the timing
of new products.
Wine:
The segment's net revenue surged 11.9% to $113 million in the
quarter, while revenues net of excise tax went up 12.4% year over
year to $109 million.
However, the adjusted OCI, remained flat at $15 million in the
quarter. Wine shipment volume went up 6.6% primarily due to
increased export of wine during the quarter.
Financial Services:
Reported and adjusted operating income for the financial services
segment in the first quarter of 2011 increased $31 million to $52
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 Philip Morris USA Inc.'s (PM USA) cigarette
volume declines.
The new program is thus expected to deliver $400 million in
annualized cost savings by the end of 2013.
Share Repurchase
Altria bought back 9.9 million shares of its common stock priced
at $29.71 for a total cost of approximately $294 million during the
first quarter.
Dividend
In March 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 April 20, 2012, Altria's
annualized dividend yield was 5.1%.
Other Financial Update
At the end of March 31, 2012, cash and cash equivalents were
$4.15 billion versus $3.27 billion at the end of December 31, 2011.
The company had long term debt of $13.08 billion at the end of
March 31, 2012 almost equal to that in the previous quarter.
Business Outlook
Altria forecasts that the fiscal 2012 earnings will lie in the
range of $2.17 to $2.23 per share. This excludes estimated charges
of 2 cents per share related to asset impairment, exit, integration
and implementation costs primarily related to the cost reduction
program announced in October 2011, and estimated charges related to
SABMiller special items.
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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