Altria’s 1Q17 Earnings Were Lower than Analysts’ Estimates

In 1Q17, Altria Group (MO) posted EPS (earnings per share) of $0.72. Removing special items, the adjusted EPS stood at $0.73—slightly lower than analysts’ estimate of $0.74. Altria’s adjusted EPS rose 1.4% from $0.72 in 1Q16.

Altria’s EPS growth was driven by revenue growth, margin expansion, and share repurchases in the last 12 months. However, some of the growth was lower due to a decline in equity earnings from Anheuser-Busch Inbev (BUD) investments. Due to the reporting lag, earnings from Anheuser-Busch in 4Q16 were included in Altria’s 1Q17 earnings. Anheuser-Busch’s earnings were impacted negatively by macroeconomic factors in Brazil and share-based compensations.

In the last 12 months, Altria repurchased shares worth $1.6 billion. By the end of 1Q17, the company had $1.38 billion under its share repurchase program. Share repurchases reduce the number of shares outstanding and boost the company’s EPS.

In 1Q17, Reynolds American (RAI) posted EPS growth of 12%, while Philip Morris International’s (PM) EPS didn’t change.

For the next four quarters, analysts expect Altria to post an adjusted EPS of $3.38, which represents 11.2% growth from $3.04 in the same quarters the previous year. The EPS growth is expected to be driven by revenue growth, margin expansion, and share repurchases. For 2017, Altria’s management set EPS guidance of $3.26–$3.32, which represents 7.5%–9.5% growth.

In the next part, we’ll look at Altria’s valuation multiple.