Tobacco products company Altria Group Inc. (MO: News ) reported Wednesday a higher profit in its second quarter, mainly reflecting reversal of tax reserves, despite a decline in revenues. Quarterly earnings per share came in line with market projections. Further, the company lifted its fiscal 2010 earnings forecast, citing strong first-half performance.
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The Richmond, Virginia-based company's second-quarter net earnings attributable to the company increased 3.2% to $1.04 billion from $1.01 billion last year. On a per share basis, earnings rose 2% to $0.50 from $0.49 in the earlier year quarter.
Excluding certain one-time items at both periods, earnings per share for the quarter was $0.50, unchanged from last year.
On average, 10 analysts polled by Thomson Reuters expected earnings of $0.50 per share for the quarter. Analysts' estimate typically excludes one-time items.
Altria attributed the profit growth mainly to the reversal of tax reserves and associated interest, partially offset by lower operating income, and lower earnings from Altria's equity investment in SABMiller due primarily to special items.
Net revenues for the second quarter decreased 6.6% to $6.27 billion from $6.72 billion in the previous year. Revenues net of excise taxes decreased 5.5% to $4.3 billion, due primarily to lower cigarette volume related to trade inventories. Six analysts estimated revenues of $4.37 billion for the quarter.
Operating companies income edged up 1.4% to $1.76 billion from $1.73 billion a year ago, while operating income decreased 8.8% to $1.53 billion from $1.68 billion a year ago, due to a reduction of Kraft and PMI receivables for tax liabilities.
Altria's reporting segments are Cigarettes, manufactured by PM USA, Smokeless Products, manufactured by USSTC and PM USA, Cigars, manufactured by John Middleton Co.; Wine, produced and distributed by Ste. Michelle, and Financial Services, provided by PMCC.
Quarterly net revenues from Cigarettes fell 7.2% year-over-year to $5.59 billion, and revenues net of excise taxes dropped 5.8% to $3.74 billion. PM USA's reported domestic cigarette shipment volume declined 10.2% to 36.5 billion units from 40.6 billion units a year ago, due primarily to trade inventory changes. In the quarter, Marlboro achieved retail share of 42.8%, and PM USA's second-quarter cigarette retail share increased 0.7 share points.
In the Smokeless Products segment, revenues grew 4.6% to $390 million. USSTC and PM USA's combined reported domestic smokeless products shipment volume for the quarter increased 9.2% from last year to 181.9 million cans and packs.
Cigars' net revenues were $155 million, up 31.4% from the prior year, with 19.7% rise in volume to 323 million units. Total wine revenues rose 12.8% to $106 million, with a 10% rise in volume to 1.58 million cans.
In the preceding first quarter, Altria reported net earnings of $813 million or $0.39 per share, adjusted net earnings of $866 million or $0.42 per share, on net revenues of $5.76 billion. Revenues net of excise taxes were $4 billion.
Among other cigarette manufacturers, Reynolds American Inc. (RAI: News ) is slated to release second-quarter results on Thursday, July 22, with analysts projecting earnings of $1.31 per share on revenues of $2.22 billion. In the first quarter, the Winston-Salem, North Carolina-based company had reported net income of $82 million or $0.28 per share, adjusted net income of $325 million or $1.11 per share, and net sales of $1.98 billion.
For the first six months of fiscal 2010, Altria's net earnings attributable to the company climbed 16% to $1.86 billion from prior year's $1.60 billion. Earnings per share grew to 15.6% to $0.89 from $0.77 a year earlier. Adjusted earnings per share increased 3.4% to $0.92 from last year's $0.89. First-half net revenues increased 7% to $12.03 billion from $11.24 billion last year, while revenues net of excise taxes decreased 1.4% to $8.3 billion.
Commenting on the results, Michael Szymanczyk, chairman and chief executive officer of Altria, said, "We are very pleased with the performance of Altria and its operating companies through the first half of 2010, as our business results exceeded our expectations coming into the year. Our adjusted 2010 first-half earnings per share grew, driven by solid income growth across our tobacco and wine businesses. Primarily because of our solid first-half performance, Altria is increasing its guidance for its 2010 full-year reported and adjusted diluted earnings per share."
Further, Altria raised its fiscal 2010 earnings guidance to a range of $1.81 to $1.85 per share from its earlier range of $1.78 to $1.82 per share. The revised forecast reflects an 18% to 20% from last year's earnings of $1.54 per share.
The company also lifted full-year guidance for adjusted earnings to a range of $1.87 to $1.91 per share from its prior range of $1.85 to $1.89 per share, reflecting a 7% to 9% rise from prior year's adjusted earnings of $1.75 per share.
Altria noted that the upward revision reflects solid first-half business performance, higher projected earnings from operations and net tax benefits from the reversal of tax reserves and associated interest. Analysts project earnings of $1.88 per share for the full year 2010, with estimates ranging between $1.85 per share and $1.90 per share.
MO is currently trading at $21.58, up $0.05, on a volume of 3.899 million shares. In the past 52 weeks, shares have traded between $17.07 and $21.91. Enditem
