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Will Altria’s Earnings Rise in Next 4 Quarters?

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Earnings estimate

During the next four quarters, analysts are expecting Altria Group (MO) to post EPS (earnings per share) of $3.37, which represents a growth of 10.9% from $3.04 in the corresponding quarters of the previous year. For 2017, the company has reaffirmed its 2017 EPS guidance to be in the range of $3.26–$3.32.

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EPS growth

EPS growth is expected to be driven by expansion in EBIT (earnings before interest and tax) margins, revenue growth, and share repurchases. At the end of 1Q17, Altria had $1.38 billion under its share repurchase program. Share repurchases reduce the number of shares outstanding, thus boosting the company’s earnings.

During the next four quarters, analysts are expecting Altria to post EBIT margins of 50.2% compared to 46.8% in the corresponding quarters of the previous year. The expansion in EBIT margins is expected to be driven by a rise in product prices, improvement in productivity due to the initiatives undertaken in January 2016, and lower SG&A (selling, general, and administrative) expenses. The company’s SG&A expenses are expected to fall from 13.4% in the corresponding quarters of the previous year to 11% due to lower marketing, administrative, and research expenses.

The above graph shows that the company has outperformed analysts’ estimates three times in the last four quarters. When this happens, the stock price tends to rise.

Peer comparisons

During the same period, Philip Morris International (PM) and Reynolds International (RAI) are expected to post earnings growth of 12.3% and 7.6%, respectively.

Next, we’ll look at Altria’s valuation multiple.

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