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Altria (MO) Q4 Earnings Beat, Revenues Miss Estimates

Altria Inc. 's MO fourth-quarter 2016 adjusted earnings of 68 cents per share beat the Zacks Consensus Estimate of 67 cents by a penny. Further, earnings increased 1.5% year over year driven by a strong performance of the core tobacco business and the leading premium brands.

Shares of the company gained 9% over the past three months outperforming the Zacks categorized Tobacco industry which has witnessed an increase of 6%.

Revenues and Margins

Net revenue dipped 1% to $6.3 billion backed by higher sales across all segments. Revenues net of excise taxes inched up 0.1% year over year to $4.7 billion. However, the top line missed the Zacks Consensus Estimate of $4.86 billion by 2.1%.

Supported by lower excise tax levied on products, gross profit increased 3.9% year over year to $2.82 billion. Operating companies income advanced 3.3% to $2.1 billion.

Altria Group Price, Consensus and EPS Surprise

Altria Group Price, Consensus and EPS Surprise | Altria Group Quote

Segment Details

Smokeable Products Segment: Net revenue edged down 1.9% year over year to $5.5 billion owing to higher pricing. Revenues net of excise taxes dipped 0.9% to $3.97 billion.

Shipment volume decreased 5% year over year to 29.5 billion units.

Cigarettes retail market share remained flat year over year as higher gains in Marlboro and Discount brands were offset by lower shares in Other Premium brands. Retail share for cigars dipped 0.8 percentage points (pp) due to lower shares at the Black and Mild brand.

Smokeless Products : Revenues jumped 7.2% to $521 million supported by higher pricing, partially neutralized by increased promotional investments. Revenues net of excise taxes increased 7.7% to $488 million during the quarter.

Smokeless Products' shipment volume gained 2.2% to 213.1 million units buoyed by a 6.6% surge in Copenhagen and Skoal shipment volumes.

Smokeless Product's retail share grew 0.8 pp year over year to 55.8%. Copenhagen brand's retail share increased 2.4 pp, while Skoal witnessed a 1.3 pp dip.

Wine : The segment's revenues went up 7.4% year over year to $248 million on the back of higher shipments. Revenues net of excise taxes increased 8.1% year over year to $240 million.

Wine shipment volume rose 4.2% to 3.1 million units driven by higher shipments of Ste. Michelle brand.

Fiscal Results

Full year 2016 adjusted earnings of $3.03 per share met the Zacks Consensus Estimate and increased 8.2% year over year.

Net revenue slipped 1.2% to $25.7 billion backed by higher sales across all segments. Revenues net of excise taxes climbed 2.6% year over year to $19.3 billion. The top line missed the Zacks Consensus Estimate of $19.8 billion.

Outlook

Altria issued guidance for full year 2017 adjusted earnings to be in a range of $3.26-$3.32, up 7.5% to 9.5% compared with adjusted earnings of $3.03 in 2016. Altria expects that its 2017 full year effective tax rate on operations to be approximately 36%.

Altria anticipates capital expenditures for 2017 in the range of $180 million-$220 million, and depreciation and amortization expenses of approximately $220 million.

Financial Updates

Anheuser-Busch InBev took over SABMiller on Oct 10, 2016. Altria received a 9.6% ownership of AB InBev, and approximately $5.3 billion in pre-tax cash as per the terms of the acquisition. Altria anticipates incurring a pre-tax gain of approximately $13.7 billion, or $4.55 per share, effective in fourth-quarter 2016.

During 2016, Altria paidover $4.5 billion in dividends, raised dividend by 8%, and repurchased over $1 billion of shares under an expanded $3 billion share repurchase program.

As of Dec 31, 2016, Altria had $4.56 cash and cash equivalents compared with $2.29 billion as of Sep 30, 2016. Long-term debt was $13.88 billion compared with $13.87 billion as of Sep 30, 2016.

Consolidation of Manufacturing Facilities

In Oct 2016, Altria announced that it will consolidate several of its manufacturing facilities to streamline operations and achieve greater efficiencies. The consolidation, scheduled to be completed by first-quarter 2018 is expected to deliver approximately $50 million in cost savings by the end of 2018.

E-Vapor Category in Focus

Altria's subsidiary Nu Mark LLC (Nu Mark) stepped up the distribution of MarkTen XL and Green Smoke e-vapor products across several markets.

Productivity Initiative

In Jan 2016, Altria announced the implementation of an initiative for approximately $300 million in annual productivity savings by the end of 2017. Part of the savings is to be realized through reduced spending on certain infrastructure and will be invested in brand building and regulatory capabilities. Such initiatives are expected to aid the company reap higher profits over the long term.

Zacks Rank & Key Picks

Altria currently carries a Zacks Rank #3 (Hold).

Helen of Troy Ltd. HELE carries a Zacks Rank #2 (Buy) and has an expected earnings growth rate of 10.8%. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Pinnacle Foods Inc. PF also carries a Zacks Rank #2 and has an expected earnings growth rate of 8.3%.

Con Agra Foods Inc. CAG , another Zacks Rank #2 stock has an expected earnings growth rate of 8%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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