Earnings Preview: Altria Group Inc. Jul 18

Source from:  AP 07/20/2011

Altria Group Inc., owner of the biggest U.S. cigarette maker, Philip Morris USA, is expected to show rising profit when it reports its second-quarter results before the stock market opens Wednesday, even though Americans are still buying fewer cigarettes in the face of tax increases and rising health concerns. WHAT TO WATCH FOR: Whether Marlboro, the top-selling U.S. cigarette brand, can retain its command of the market. Richmond-based Altria saw its market share fall in the first quarter for the first time in nearly two years. The company has introduced several new products under the Marlboro brand - often with lower promotional pricing - including special blends of both menthol and non-menthol cigarettes to help keep the brand growing and attract its competitor's smokers. The company said Marlboro accounted for 42.2 percent of cigarettes sold in the U.S. in the first quarter, although it sold 5.7 percent fewer of the brand in the period. It was the first year-over-year market share decline for the brand in nearly two years. Its other brands, including Virginia Slims, Parliament and Basic, also saw declines in market share and volumes. Overall the number of cigarettes sold fell 6.4 percent to 31.9 billion in the quarter. Altria faces competition from other companies' less expensive brands - like Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc. Even so, Altria has raised prices on some brands and maintained its profit per pack. Altria and other tobacco companies are looking to cigarette alternatives - such as cigars, snuff and chewing tobacco - for growth. So analysts will want to see how Altria's Black & Mild cigars and Copenhagen and Skoal smokeless tobacco products, as well as Marlboro Snus, perform. Its revenue and volume in smokeless products fell slightly last quarter after a period of gains. Altria's cigar business saw revenue fall last quarter as it spent more money promoting the brand, but its volumes grew nearly 2 percent. The company continues to work on cutting general and manufacturing costs. Altria said last month that it will record a $630 million charge in the second quarter tied to the tax treatment of some leveraged lease transactions entered into by its subsidiary, Philip Morris Capital Corp. WHY IT MATTERS: Increased spending on premium brands like Marlboro could signal consumers are adjusting to paying more for cigarettes following federal and state tax increases. Consumer spending continues to be critical to a strong rebound from the worst economic downturn since the Great Depression. WHAT'S EXPECTED: Analysts expect Altria to earn 53 cents per share on sales of $4.36 billion, according to FactSet. Analysts typically exclude one-time items from their earnings estimates. LAST YEAR'S QUARTER: Altria reported net income of 50 cents per share, excluding one-time items. Its revenue was $4.34 billion, excluding excise taxes. Enditem