Altria Group Inc.
(
MO
) delivered adjusted earnings of 58 cents per share in the third
quarter of 2012, which was in-line with the Zacks Consensus
Estimate. The results exceeded the prior-year quarter results of
56 cents by 3.6%.
The upswing in earnings came from sales growth in smokeable
products, higher earnings from Altria's equity investment in
SABMiller and lower shares outstanding due to buybacks.
Revenue and Margins
Altria's total revenue went 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. Revenue exceeded
the Zacks Consensus Estimate of $4.4 billion.
In the quarter, gross profit increased 1.6% to $2.48 billion
compared with the prior-year quarter. Operating companies' income
shot up 3.2% year over year to $1.99 billion compared with $1.93
billion in the year-ago period on the back of an ongoing cost
reduction program.
Segment Details
Smokeable Products Segment
: Net revenue for the Cigarettes segment went up 2.1% year over
year to $5.6 billion, primarily attributable to positive pricing
and higher shipment volumes and partially offset by higher
promotional investments. Revenues net of excise tax went up 3.2%
to $3.9 billion.
Furthermore, adjusted operating companies' income increased
4.3% year over year to $1.64 billion, reflecting higher pricing
and cost management in the company.
Shipment volume in the quarter went up 1.1% to 34.0 billion
sticks compared with the prior-year quarter, boosted by a 1.2%
increase in cigarette shipment volume. This offset a decline in
cigar volume.
Smokeless Products
: Net revenue in Smokeless Products increased 2.6% to $437
million, fueled by higher volume and pricing. Revenues net of
excise tax went up 2.5% to $408 million.
Furthermore, adjusted operating companies' income increased
3.3% year over year to $254 million. Smokeless products'
third-quarter shipment volume went up 5.9% to 194.3 million units
on the back of volume growth in Copenhagen and Skoal brands.
Wine
: The segment's net revenue surged 6.1% to $140 million in the
quarter, while revenues net of excise tax went up 6.3% year over
year to $145 million.
Adjusted operating companies' income went up 8.3% to $26
million on the back of higher shipment volume, improved premium
mix and higher pricing. Wine shipment volume went up 3.7%, driven
by expansion in off-premise channels.
Financial Services
: Reported and adjusted operating income for the financial
services segment in the third quarter of 2012 declined 4.8% to
$79 million.
Other Financial Update
Altria's cost reduction program for its tobacco and service
company subsidiaries, which was announced in the fourth quarter
of 2011, remains on track. The program is expected to deliver
$400 million in annualized savings by the end of 2013.
Altria repurchased 7.7 million shares at a total cost of
approximately $262 million during the third quarter of 2012.
On October 23, 2012, Altria's board authorized the expansion
of the current share repurchase program from $1.0 billion to $1.5
billion. Altria has approximately $550 million remaining in the
expanded program, which it expects to complete by the end of the
second quarter of 2013.
In August, Altria's board also increased its regular quarterly
dividend by 7.3% to 44 cents per share.
Business Outlook
Altria reiterates its fiscal 2012 earnings guidance in the
range of $2.19 to $2.23 per share, representing a growth rate of
7% to 9% from $2.05 per share in 2011.
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 (short-term Hold rating). For
the long-term, we have a Neutral recommendation on the stock.
LORILLARD CO (LO): Free Stock Analysis Report
ALTRIA GROUP (MO): Free Stock Analysis Report
REYNOLDS AMER (RAI): Free Stock Analysis
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