By How Much Did Altria’s 1Q16 Earnings Outperform Estimates?



Altria’s earnings beat estimates

Altria Group (MO) released its 1Q16 earnings on April 28, 2016. The quarter ended on March 31, 2016. The company’s adjusted diluted EPS (earnings per share) rose 14.3% to $0.72 in 1Q16. Its reported net revenue of excise taxes rose 6.0% to $4.5 billion in 1Q16.

After missing earnings expectations last quarter, Altria Group came in ahead of Wall Street analysts’ estimates on earnings in 1Q16. Consensus estimates had projected adjusted diluted EPS of $0.68.

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Reasons for the rise

In reported terms, Altria’s diluted EPS rose 19.2% to $0.62. This was mostly driven by its 2015 loss on the early extinguishment of its debt and its higher reported operating income across all product segments, including restructuring charges associated with its productivity initiative. The rise was partially offset by lower earnings from Altria’s equity investment in SABMiller (SBMRY).

Peers’ earnings

Philip Morris International’s (PM) 1Q16 adjusted diluted earnings per share fell 15.5% to $0.98. However, excluding unfavorable currency of $0.19, PM’s adjusted EPS rose by 0.9%. For Vector Group (VGR), diluted EPS came in at $0.16 in 1Q16. Reynolds American’s (RAI) adjusted EPS also rose 16.3% to $0.50 in 1Q16.

EPS guidance

Altria expects 2016 adjusted diluted EPS to be in the range of $3.00–$3.05. This range represents a growth rate of 7%–9% from an adjusted diluted EPS base of $2.80 in 2015, which excludes NPM (non-participating manufacturer) charges, SABMiller special items, asset impairment, exit and implementation costs, and tobacco claims and health litigation charges.

Altria’s share of SABMiller’s pretax special items totaled $166 million and $86 million, respectively, primarily reflecting asset impairment charges.

In the next part of the series, we’ll discuss what contributed to Altria’s 1Q16 revenue growth.

MO constitutes 0.9% of the holdings in the PowerShares S&P 500 Low Volatility ETF (SPLV).[1. Updated as of April 30, 2016]


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