Altria (MO, Financial) reported strong fourth-quarter and full-year results recently and updated the guidance.
2016 was a great year for the company. It boasts an improved balance sheet despite a decrease in revenues during the fourth quarter. There was an increase in revenues for the full year. Both fourth-quarter and full-year diluted EPS increased due to gains on transaction.
The smokeable products segment witnessed growth in income for both the fourth quarter and full year. Revenues in the smokeless segment increased primarily due to higher pricing and volume. The wine segment also witnessed an increase in revenues and OCI.
Fourth-quarter performance
Net revenues decreased by 1.0% and were $6.3 billion in the fourth quarter.
Net revenues increased by 1.2% and were $25.7 billion for full-year 2016.
The company’s reported diluted EPS increased by 723.4% and was $5.27.
Full-year reported diluted EPS increased by 172.7% and was $7.28.
Cash and cash equivalents as of Dec. 31, 2016 were $4.569 billion.
Smokeable products
Net revenues in this segment decreased by 1.9% in the fourth quarter and increased by 0.3% for the full year.
Fourth-quarter reported OCI increased by 4.3% and for the full year, OCI increased by 2.6%.
Smokeless products
Net revenues in this segment increased by 7.2% in the fourth quarter and by 9.2% for the full year.
Reported OCI decreased 11.2% in the fourth quarter and increased by 6.2% for the full year.
Wine
Net revenues in this segment increased by 7.4% in the fourth quarter.
There was an increase of 7.8% in net revenues for the full year of 2016.
OCI increased by 16.4% in the fourth quarter and increased by 7.9% for the full year.
Share repurchases
During the fourth quarter, the company repurchased 8.1 million shares at an average price of $63.67, for a total cost of about $518 million.
For the full year, it repurchased 16.2 million shares at an average price of $63.48 for a total cost of about $1 billion.
Dividend
The company recently declared a regular quarterly dividend of 61 cents per common share payable on April 10 to shareholders of record as of March 15. It paid around $1.2 billion in dividends in the fourth quarter and over $4.5 billion in 2016. (Source: company’s website)
Expectations for 2017
| Ă‚ | Range |
| Adjusted diluted EPS | To be between $3.26 and $3.32 |
| Full-year effective tax rate | To be around 36% |
| Capex | To be between $180 million and $220 million |
| Depreciation and amortization expenses | To be around $220 million |
Focus
- Ramping up its innovation process.
- Building a robust portfolio of innovative tobacco products.
- Manage balance sheet to deliver consistent performance.
- Maximize income from its premium tobacco businesses over the long term.”‹
- Strengthening organizational capability.
Conclusion
The company produced total shareholder returns of about 187% from the period 2012-2016 with a CAGR of about 8.1%. Altria’s flagship brands command the leading position in the U.S. The four premium brands include –Â Marlboro, Black & Mild, Copenhagen and Skoal. The wine segment also boasts of premium brands. It has a huge customer base despite hailing from an unhealthy industry.
Altria is growing earnings which are in sync with the long-term objectives. Throughout 2016, the company paid over $4.5 billion in dividends and repurchased around $1 billion of its shares. As per Chairman, CEO and President Marty Barrington, “Altria's total return to shareholders of 20.5% outpaced both the Standard & Poor's 500 and the S&P Food, Beverage and Tobacco Index, marking the fourth consecutive year that total shareholder return exceeded 20%."
Tobacco companies are known for their rich dividends, Altria being no exception (with a dividend payout ratio of almost 80% of its adjusted EPS). It is on track to build a strong international presence. Even with the rise in regulations, there is no dearth of tobacco huffers. It is known to return and increase dividends year over year. In the last 48 years, it has increased its dividends by about 50 times. There is definitely a social stigma attached to the cigarette industry, but in spite of that this company is performing well.
With lower debt levels and consistent dividends, adding this company will reap shareholder returns.
Disclosure:Ă‚ I do not hold any position in the company.
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