Altria Group Inc. (MO, Financial) released financial results for the second quarter of fiscal 2017 on July 27.
The American tobacco giant closed the quarter with adjusted EPS of 85 cents, up 4.9% from the second quarter of fiscal 2016 but missed analysts’ expectations by one cent. Analysts forecasted Altria would post EPS of 86 cents for the quarter. The miss generated a negative surprise of -1.20%.
Source: Yahoo finance
Revenue for the quarter came in at $5.07 billion, a 3.9% increase year over year. The company beat expectations by $50 million.
The smokeable producst segment generated $4.366 billion in revenue net of excise taxes, accounting for approximately 86.6% of the company’s revenue. Revenue from the smokeless products and wine segments accounted for 10.5% and 2.9%. Revenue from the smokeless ($530 million) and wine ($145 million) segments are also net of excise taxes.
Thanks to higher pricing, revenue from the smokeable products segment increased 3.2% from the comparable quarter of 2016. The decrease in units of cigarettes sold during the quarter – due to a considerable increase in excise taxes in California – could only partially offset higher pricing. Higher promotional investments also weighed on net revenue. During the quarter, Altria shipped 30.975 million cigarettes, down from 31.829 million cigarettes shipped in the comparable quarter of the previous fiscal year.
The increase in excise taxes in California also impacted the retail share of Marlboro – the most popular brand of cigarettes in the U.S. – which declined to 43.5% from 43.8% in the second quarter of 2016. Marlboro accounts for approximately 85% to 86% of the company’s total cigarettes retail share. The company expects the negative effects of this tax to persist in the second half of the year.
The smokeable products segment’s operating income increased 6.4% to $2.257 billion from $2.121 billion in the prior-year period.
Chairman, CEO and President Marty Barrington said higher pricing and volume drove the segment's revenues and operating income up, rebounding “from its first-quarter voluntary product recall."
Increased competition and reductions in trade inventory negatively influenced revenue and operating income in the wine segment.
Overall, Altria delivered another solid quarter due to strong performance in the smokeable products segment.
"Based on strong tobacco operating company performance, Altria delivered solid results in the second quarter and first half of 2017," Barrington said.
For full-year 2017, Altria expects adjusted EPS will range between $3.26 and $3.32, an 8.5% increase from 2016.
The stock is trading at $73.96 per share, up $2.23 or 3.11% from the previous trading day, and has gained 9.38% year to date. The company has a price-sales (P/S) ratio of 7.42 and a price-book (P/B) ratio of 11.68.
Altria pays a dividend of $2.44 per share through quarterly payments of 61 cents. The dividend yield is 3.38%.
The analysts' recommendation rating is 2.3 out of 5. The recommendation rating ranges between 1 (strong buy) and 5 (sell). The average price target for Altria is $74.54.
GuruFocus gives Altria Group a financial strength rating of 6 out of 10 and a profitability and growth rating of 8 out of 10.
Disclosure: I have no positions in Altria Group.
