2012 Second-quarter Earnings Preview: Altria Group Inc.

Source from:  CBSNews 07/24/2012

Altria Group Inc., parent of the biggest U.S. cigarette maker, Philip Morris USA, should give investors a sense of whether its top-selling Marlboro brand can keep its command of the market when it releases second-quarter financial results before the stock market opens Tuesday. WHAT TO WATCH FOR: Altria has introduced several new products with the Marlboro brand — often with lower promotional pricing — to try to keep the brand growing and steal smokers from its competitors, who also have fought cigarette sales declines with promotional prices. They include "special blends" of both menthol and non-menthol cigarettes. Among new offerings are Marlboro Eighty-Threes, which Altria says updates Marlboro's packaging, and Marlboro Black in menthol and non-menthol versions. Altria is fighting for its market share as Americans buy fewer cigarettes. The company's volumes have fallen markedly recently, but it has maintained profit by raising prices. The cigarette maker 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 $5.71 per pack during the first quarter, compared with an average of $4.23 per pack for the cheapest brand. In the first quarter, the Marlboro brand gained 0.1 point of market share in the first quarter to end with 42.3 percent of the U.S. market despite a 3.4 percent decline in the number of Marlboro-branded cigarettes sold. Altria's overall cigarette volumes fell 2.6 percent to 31.1 billion cigarettes, hurt by declines of premium cigarettes 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. Altria also owns a wine business, holds a voting stake in brewer SABMiller, and has a financial services division. But as the company anticipates volume declines in its core cigarette business, it's cutting costs. After completing a $1.5 billion multi-year cost savings program last year, Altria rolled out a plan to cut $400 million in "cigarette-related infrastructure costs" by the end of 2013. 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 makes up about 70 percent of the U.S. economy and is critical to continuing the recovery from the worst economic downturn since the Great Depression. WHAT'S EXPECTED: Analysts expect Altria to earn 57 cents per share on revenue of $4.48 billion, according to FactSet. LAST YEAR'S QUARTER: Altria reported adjusted net income of 53 cents per share on revenue of $4 billion. Figures for both periods exclude excise taxes the company passes through to the government. Enditem