Earnings Preview First-Quarter: Altria Group Inc.

Source from:  The Associated Press 04/25/2012

RICHMOND, Va. (AP) - Altria Group Inc., parent of the biggest U.S. cigarette maker, Philip Morris USA, is expected to report higher first-quarter profit and revenue when it releases its results before the stock market opens Thursday. With Americans buying fewer cigarettes, Altria's volumes have fallen markedly but the company has managed to maintain its profit by raising prices. WHAT TO WATCH FOR: Whether Marlboro, the top-selling U.S. cigarette brand, can retain its command of the market. Richmond-based Altria said its top-selling Marlboro brand lost 0.7 points of market share to end up with 41.6% of the U.S. market. Marlboro volumes declined less than 1%. The company has introduced several new products with the Marlboro brand, often with lower promotional pricing. They include special blends of cigarettes to try to keep the brand growing and steal smokers from its competitors. Altria still faces pressure in the current economy from less-expensive brands such as like Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc. Marlboro sold for an average of $5.73 per pack during the fourth quarter, compared with an average of $4.24 per pack for the cheapest brand. Cigarettes volumes were flat last quarter at 33.7 billion cigarettes compared with a year ago as an increase of nearly 20% in its discount cigarette brands offset declines in its premium brands like Marlboro. Altria and other tobacco companies also are looking for growth from cigarette alternatives - such as cigars, snuff and chewing tobacco. 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. It also owns a wine business, holds a voting stake in brewer SABMiller, and has a financial services division. Smokeless tobacco volumes increased about 10% and its brands had 55.5% of the market, which is tiny compared with cigarettes. Volume for its Black & Mild cigars fell about 6% during the period. Altria also continues to work on cutting general and manufacturing costs. During the second half of last year completed a multi-year cost savings program, exceeding its goal of reducing costs by $1.5 billion between 2007 and 2011 compared with 2006. It also rolled out a plan to cut $400 million in "cigarette-related infrastructure costs" by the end of 2013 in advance of anticipated cigarette volume declines. 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 49 cents per share on sales of $4.01 billion, according to FactSet. LAST YEAR'S QUARTER: Altria reported adjusted net income of 44 cents per share on revenue of $3.94 billion. Figures for both periods exclude excise taxes the company passes through to the government. Enditem