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Will Altria Outperform Analysts’ EPS Expectations in Q4 2018?

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Jan. 28 2019, Updated 11:20 a.m. ET

Fourth-quarter EPS

For the fourth quarter, analysts are expecting Altria Group (MO) to post adjusted EPS of $0.95, which represents a rise of 4.4% from $0.91 in the corresponding quarter of 2017. For 2018, Altria’s management expects its EPS to be in the range of $3.95 to $4.03, which represents a rise of 16.5% to 19% from $3.39 in 2017.

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EPS growth

Altria’s EPS growth is expected to be driven by revenue growth, expansion of net margin, and share repurchases. For the quarter, analysts are expecting Altria’s net margins to improve from 37.0% to 37.6%. The expansion is likely to be driven by higher gross margin and a lower effective tax rate. However, some of the expansion is expected to be offset by higher SG&A (selling, general, and administrative) expenses.

Altria has repurchased 21.8 million shares for $1.32 billion in the first three quarters of 2018. By the end of the third quarter, the company had $700 million available under its share repurchase program. Share repurchases lower the number of shares outstanding, thus driving the company’s EPS.

Peer comparisons

During the same period, Philip Morris International (PM) is expected to post EPS of $1.17, which represents a fall of 11.5% from $1.32 in the corresponding quarter of 2017.

Dividends

On December 12, Altria declared dividends of $0.80 per share, which represents an annualized payout of $3.20. In 2018, the company paid dividends of $3.00, which represents growth of 18.1% from $2.54 in 2017.

As of January 25, the company’s dividend yield stood at 7.23% with its stock price trading at $44.24. On the same day, the dividend yield of Philip Morris and British American Tobacco stood at 6.27% and 8.59%, respectively.

Next, we will look at analysts’ recommendations.

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