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How Altria Group’s 3Q17 Earnings Outperformed Analyst Estimates

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3Q17 performance

In 3Q17, Altria Group (MO) posted EPS (earnings per share) of $0.97. After removing special or one-time items, the company’s adjusted EPS stood at $0.90, which is 3.4% higher than analyst estimates of $0.87. Year-over-year, the company’s 3Q17 earnings grew 9.8% from $0.82 in 3Q16.

EPS growth

The expansion in net margins and share repurchases during the last four quarters drove Altria’s EPS in 3Q17. However, some of the EPS growth was offset by the decline in revenues. 

In the last four quarters, the company has repurchased ~41.3 million shares for ~$3.0 billion. By the end of 3Q17, the company had ~$576.0 million in its share repurchase program. Share repurchases reduce the number of shares outstanding, boosting the company’s EPS.

From the chart above, we can see that the company has outperformed analyst estimates three times in the last five quarters. When this happens, the stock price of the company tends to rise.

Peer comparisons and outlook

During the same period, Philip Morris International (PM) posted adjusted EPS of $1.27, which represents 1.6% growth from $1.25 in 3Q16.

After posting strong 3Q17 earnings, Altria’s management reaffirmed its 2017 EPS guidance to be $3.26–$3.32, which represents growth of 7.5%–9.5% from an adjusted diluted EPS base of $3.03 in 2016. 

For the next four quarters, analysts expect Altria to post EPS of $3.52, which represents growth of 11.4% from $3.16 in the corresponding four quarters of the previous year.

Next, we’ll look at Altria Group’s valuation multiples.

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