Altria’s EPS growth
In the first three quarters of 2018, Altria Group (MO) posted adjusted EPS of $3.04, which represents growth of 22.6% from $2.48 in the corresponding three quarters of the previous year. Also, the company has outperformed analysts’ EPS expectations in all three quarters.
Altria’s EPS growth was driven by revenue growth, expansion of net margins, and a decline in the number of shares outstanding primarily due to share repurchases. During the period, the company’s net margin improved from 32.3% in the corresponding quarters of 2017 to 38.8% due to the lower effective tax rate and favorable pricing. The company’s effective tax rate declined by 6.1% to 25.1% for the first nine months of 2018. During the same period, Altria has repurchased 21.5 million shares for ~$1.30 billion. Share repurchases lower the number of shares outstanding, thus driving its EPS.
Philip Morris’s EPS growth
In the first three quarters of 2018, Philip Morris International (PM) posted adjusted EPS of $3.85, which represents an increase of 13.6% from $3.39 in the corresponding four quarters of the previous year. The EPS growth was driven by revenue growth and expansion of net margins. During the period, the company’s net margins expanded from 26.1% to 27.1% due to the lower effective tax rate and favorable pricing variance. However, some of the growth in EPS was offset by a decline in adjusted operating margin due to increased investments in RRPs (reduced risk products) and higher marketing, administration, and research expenditure.
Next, we’ll look at Altria’s initiatives to drive its sales.