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Altria (MO) to Report Q4 Earnings: A Beat in the Cards?

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Altria Group Inc.MO is slated to release fourth-quarter and full-year 2016 results before the opening bell on Feb 1, 2016. The tobacco sector is smoking hot of late and it seems to have gone back to the 'good old days' with higher profit and a slowdown in litigations. Altria is no exception to the general trends of the industry and thus investors eagerly await the upcoming fourth-quarter results.

After reporting positive surprises for the last two quarters, we expect Altria to continue the trend and report a beat when it reports fourth-quarter and full-year 2016 results.In fact, the company reported positive surprises in three of the trailing four quarters, bringing the average positive surprise to 1.72%. During third-quarter 2016 Altria beat earnings estimates by 1.23%.

Investors are buoyed by the decent performance of the company. It is evident from the fact that the company's shares have gained 7.5% in the past three months, outperforming the Zacks categorized Tobacco industry which has witnessed an increase of 5.2%. Altria's shares have also outperformed the Zacks categorized Consumer Staples sector which has declined 1.8%.

Why a Likely Positive Surprise?

Our proven model shows that Altria is likely to beat earnings because it has the right combination of two key ingredients.

Zacks Earnings ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 1.49%.This is because the Most Accurate estimate is at 68 cents, while the Zacks Consensus Estimate is pegged lower at 67 cents. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Altria currently carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks of #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Altria's Zacks Rank # 3 and an Earnings ESP of 1.49% makes us very optimistic about a possible earnings beat on Feb 1.

Factors that are Driving Better-than-Expected Results

Altria reported strong results for the first nine months of 2016, wherein both the top line and bottom line improved year over year driven by higher shipments and retail share gains by its flagship brand Marlboro. As per analysts this trend is expected to continue in the fourth quarter as well.

Meanwhile, the company has upgraded its shopping website - marlboro.com - which provides engaging content directly to adult smokers through mobile devices. Adult smokers and retailers are responding enthusiastically to Marlboro's digital engagement efforts, as Marlboro mobile coupon redemptions continue to increase in line with expectations.

Further, a subsidiary of the company, PM USA, expanded the distribution of Marlboro Slate, a bold menthol product in the Marlboro Black family, in third-quarter 2016 to offer adult smokers a strong menthol flavor. We expect this strategic move to have a favorable impact on the company's financial numbers in the to-be-reported quarter.

Altria gave an optimistic outlook for full-year 2016. It expects its 2016 adjusted EPS to be in a range of $2.98-$3.04. The guidance represents a growth of 6.5% to 8.5% from 2015. The Zacks Consensus Estimate is pegged at $3.03, up 8% from the year-ago level.

For the fourth quarter the Zacks Consensus Estimate is pegged at 67 cents, up 30% year over year.

Stocks to Consider

Here are some stocks that investors may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Campbell Soup Company CPB has an Earnings ESP of +1.15% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Coty Inc. COTY has an Earnings ESP of +5.6% and a Zacks Rank #3.

The Kraft Heinz Company KHC has an Earnings ESP of +1.15% and a Zacks Rank #3.

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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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