Altria Group Inc. (MO, Financial) closed the third quarter of 2016 reporting adjusted diluted EPS of 82 cents, a 1.2% increase from the second quarter of 2016 and a 9.3% increase on a year over year basis. Altria beat analysts' expectations by two cents, generating a positive surprise of 2.50%:
Source: Yahoo Finance
Approximately 86% of total revenue and income from operations is generated by the sale of cigarettes and cigars.
The company attributed higher third quarter adjusted diluted EPS to the increase in the price of cigarettes. During the third quarter, Altria sold less smokeable products, but the decline in sales volumes was not enough to influence revenues, income from operations and adjusted diluted earnings.
A reduction in sales volumes of tobacco (-4.9%) in the second quarter had a negative impact on the revenue of the entire segment (down 2.4% in the second quarter and flat in the first six months of 2016). Third quarter tobacco sales volumes declined 0.9%, but was not sufficient enought to neutralize the impact of an increase in the price of cigarettes. In the third quarter, net revenues increased by 1.8% on a year over year basis, leading to an improvement in the total segment’s revenue: up 0.9% in the first nine months of 2016 versus up 0.5% in the first six months of 2016, both on a year over year basis.
Below, data for the smokeable products segment revenues of the second and third quarters of 2016, the first nine months and the first half of 2016 is displayed:
Source: Altria’s third quarter and first nine months report and second quarter and first half report
Revenue's net of taxation increased by 2.7% in the third quarter (versus -1.1% in the second quarter of 2016) and 2.2% for the first nine months of 2016 (versus 1.9% in the first six months of 2016) on a year over year basis, according to Altria's third quarter 2016Ă‚ and third quarter 2015 reports.
The company's adjusted operating income increased by 4.2% in the third quarter of 2016 and 5.8% during the first nine months of 2016, according to Altria's third-quarter report.
Below is the third and the second quarter, the first nine months and the first half of 2016 decreases in the shipment volume of the smokeable products segment:
Source: Altria’s third quarter and first nine months report and second quarter and first half report
For 2016, Altria expects adjusted diluted EPS will range between $2.98 and $3.04, an average increase of 7.5% from the previous year.
Currently, the stock is trading at $65.27 per share, which is up 89 cents or 1.38% from the previous trading day and has gained 12% year to date.
The analysts’ recommendation is 2. The recommendation rating ranges between 1 (strong buy) and 5 (sell). The average price target for Altria Group is $69.30.
Other Altria Group news:
- Altria's board expanded the $1 billion share repurchase program to $3 billion. The company expects to complete the program by the end of the second quarter of 2018.
- The completion of the Anheuser-Busch InBev and SABMiller merger brings in proceeds of $5.3 billion, which the company will use to sustain the payment of dividends.
- The extinguishment of a corporate loan.
Altria Group can be assessed with a dividend discount model since the company is a faithful issuer of a quarterly dividends and the variables can be chosen, as explained in this article.
Disclosure: I have no positions in Altria Group.
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