Altria Group Inc. (MO, Financial) released financial results for the third quarter Oct. 26.
The American tobacco giant closed the quarter with EPS – adjusted to one-time charges – of 90 cents, up 9.8% from the third quarter of fiscal 2016 and beat expectations by 3 cents.
The beat generated a positive surprise of 3.40%.
Source: Yahoo Finance
Revenue – net of excise taxes – for the quarter came in at $5.123 billion, a 1.35% decrease from the comparable of fiscal 2016. Altria Group missed expectations on third-quarter revenue by about $70 million.
The smokable products segment generated $4.410 billion in revenue (net of excise taxes), accounting for approximately 86.1% of the company’s total quarterly figure of net revenue. Revenue from the smokeless products and wine segments accounted for 10.05% and 3.42%. Revenue from the smokeless segment came in at $530 million (net of excise taxes) and from the wine segment came in at $145 million (net of excise taxes).
Because of lower sales volume of tobacco, revenue – net of excise taxes – from the smokable products segment decreased by 1.5% from the comparable quarter of 2016. Higher pricing could only partially counterbalance the decrease in units of cigarettes sold during the quarter. Higher promotional investments also negatively weighed on net revenue.
During the quarter, Altria shipped 30.828 million cigarettes, down from 32.864 million cigarettes shipped in the prior-year quarter. This decrease in the shipment volume of tobacco products was, the company reports, “primarily driven by the industry's rate of decline, trade inventory movements, retail share declines and one fewer shipping day.”
The retail share of Marlboro – the most popular brand of cigarettes in the U.S. – declined to 43.2% in the third quarter from 43.7% in the second quarter. The decline was, reports Altria Group, “primarily driven by the cigarette excise tax increase in California and increased competitive activity.” Marlboro accounts for approximately 85.5% of the company’s total cigarettes retail share. The negative effects on Marlboro’s retail share from this tax increase is expected by the company to persist until the end of fiscal 2017.
The smokable products segment’s operating income – adjusted to one-time charges – increased by 4.5 percentage points to $2.3 billion in the third quarter from $2.135 billion in the prior-year period.
The U.S. tobacco giant also delivered figures on the first six months of fiscal 2017 compared to the same reporting period of fiscal 2016. These figures can also be found in the company’s report.
Marty Barrington – the chairman, CEO and president of Altria Group – commented on the U.S. tobacco giant’s periodic results: "Altria delivered outstanding performance in the third quarter and for the first nine months of 2017 as our core tobacco operating companies generated strong income growth. Our financial performance continues to strengthen in the second half, as we expected. And we continued to focus on rewarding shareholders through the first nine months, paying out more than $3.5 billion in dividends and repurchasing nearly $2.4 billion in shares. In August, Altria's board of directors voted to increase our quarterly dividend per share by 8.2%."
For full-year 2017, Altria expects adjusted EPS will range between $3.26 and $3.32, an 8.5% increase from 2016. This guidance is essentially unchanged from the previous one.
The stock is trading at $65.79 per share, up $2 or 3.14% from the previous trading day, and has lost 2.71% year to date. The company has a price-sales (P/S) ratio of 6.52 and a price-book (P/B) ratio of 10.18.
After the most recent increase, Altria pays a dividend of $2.64 per share through quarterly payments of 66 cents. The forward dividend yield is 4.09% if this quarterly dividend is kept constant by the tobacco giant for the next three quarters. Since Altria Group has a long tradition of being a loyal dividend payer, there isn’t any doubt about that.
The analysts' recommendation rating is 2.1 out of 5. The recommendation rating ranges between 1 (strong buy) and 5 (sell). The average price target for Altria is $72.33.
The tobacco giant closed the quarter with $2.582 billion in cash on hand and securities and with current assets and liabilities valued $5.156 billion and $6.662 billion. The last two items led to a current ratio of 0.77 versus an industry average of 1.25.
The total debt amounted to $13.890 on Sept. 30, or 43.5% of Altria Group’s total liabilities. The total debt to equity ratio is 114.14% as of third-quarter figures, versus an industry average of 100%.
Disclosure: I have no position in Altria Group.
