Altria Group Inc. (MO, Financial) closed fourth-quarter 2016 reporting adjusted EPS of 68 cents, a 17.1% decrease from third-quarter 2016 and a 1.5% increase on a year-over-year basis. Altria beat expectations by one cent, generating a positive surprise of 1.50%.
For the full year, the tobacco giant generated adjusted EPS of $3.03, an 8.2% increase on a year-over-year basis. In 2015, Altria reported adjusted EPS of $2.8.
For the quarter, Altria generated net revenue of $4.73 billion, flat on a year-over-year basis, and missed expectations by $70 million.
Approximately 84% of total net revenue and income from operations was generated by the sale of cigarettes and cigars.
The smokeable products segment, which accounted for 84.5% of the company’s total revenue net of tax on tobacco, alcohol and smokeless products for the quarter, generated sales of $5.453 billion. This figure is flat on year-over-year basis. For the quarter, the increase in the price of cigarettes was not enough to completely compensate for the decline in units shipped.
Net revenue from the smokeless products and wine segments were $521 million and $248 million, up 7.7% and 8.1% on a year-over-year basis.
The increase in the price of tobacco was attributed to the 3.7% year-over-year increase in the operating income of the smokeable products segment, which was $1.858 billion for the quarter. The income generated by this segment accounted for approximately 84% of the company’s total operating income for the quarter.
The other segments, smokeless products and wine, contributed 13.1% and 2.9% to the company’s total quarterly operating income.
Improved adjusted operating income was not the only reason why Altria reported higher EPS.
In addition, the improvement in EPS was achieved by spending less on new tobacco products, sustaining fewer financial costs and generating “higher operating results at PMCC."
For 2017, Altria expects adjusted EPS will range between $3.26 and $3.32, an average increase of 8.5% from the previous year.
Currently, the stock is trading at $69.54 per share, down $1.64 or -2.30% from the previous trading day, and has gained 2.97% year to date. The price-sales ratui is 7.18 and the price-book ratio is 47.20.
Altria pays a dividend of $2.44 per share though quarterly payments of 61 cents. The dividend yield is 3.44%.
The analyst recommendation rating is 2.1. The recommendation rating ranges between 1 (strong buy) and 5 (sell). The average price target for Altria is $70.18. Recently, the tobacco giant was upgraded by Bank of America Merrill Lynch with a new target price of $68.82 per share.
Disclosure: I have no positions in Altria Group.
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