Altria Group Inc. (MO) has reported strong first quarter 2010 results with earnings of $0.39 per share, up 39.3% compared to the year-earlier quarter. Adjusted earnings, however, marginally missed the Zacks Consensus Estimate by a penny. Profits were primarily driven by the company’s growth in the cigarette and cigar businesses.
Net revenues for the quarter increased 27.3% year-over-year to $5.7 billion, primarily driven by cigar segment results that increased 17.4%. The cigarette segment revenues increased 31.5% for the quarter. Altria’s smokeless products segment posted revenue growth of $381 million during the quarter.
Total industry cigarette shipments declined approximately 10% during the quarter, while cigarette shipments for the company declined 11% after adjustments in trade inventories. Volume for the company’s core brand Marlboro grew 1.6%, while its market share decreased marginally by 0.3 point. Volumes of other premium and discount brands declined 10.4% and 17.0%, respectively, during the quarter. Their market shares also declined 0.6 and 0.4 points, respectively.
Altria generated $43 million in cost savings in the quarter. The company expects to achieve approximately $419 million in additional cost savings by 2011. Furthermore, as part of its corporate expense and selling, general & administrative (SG&A) cost reduction initiatives, the company incurred pre-tax charges of $29 million in the reported quarter, for exit and implementation costs related to the Phillip Morris USA’s Manufacturing Optimization Program. For the year 2010, the company expects to incur pre-tax charges of $70 million.
Based on the first quarter results, Altria reaffirmed its 2010 full-year guidance for EPS to be in the range of $1.78 to $1.82. This guidance includes estimated charges of $0.07 per share related to exit, integration and implementation costs, UST acquisition-related costs and SABMiller special items. Altria also reaffirmed that its 2010 full-year guidance for EPS is expected to be in the range of $1.85 to $1.89 per share.
Altria expects the business environment for 2010 to likely remain challenging, as adult consumers remain under economic pressure and face high unemployment.
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