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Altria Met Analyst EPS Expectations in Q4 2018

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Feb. 1 2019, Updated 11:10 a.m. ET

Fourth-quarter performance

Altria Group (MO) posted adjusted EPS of $0.95 in the fourth quarter, which represents growth of 4.4% from $0.91 in the corresponding quarter of 2017. The EPS growth was driven by revenue growth, the expansion of its net margin, and a lower share count due to share repurchases partially offset by a decline in operating margin.

For the quarter, Altria’s net margin improved by 0.3% to 37.3%. The favorable pricing and a lower effective tax rate drove the company’s net margins, which were partially offset by higher costs associated with the smokeless and wine segments. During the quarter, the company’s effective tax rate stood at 23.1% compared to 27% in the fourth quarter of 2017.

Moving to share repurchases, Altria has repurchased 27.9 million shares for ~$1.67 billion in 2018. Share repurchases lower the number of shares outstanding, thus driving the company’s EPS.

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Peer comparison

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.

Outlook

During 2019, Altria’s management expects the cigarette industry volume to decline by 3.5% to 5%. For the same period, Altria’s management expects its adjusted EPS to be in the range of $4.15 to $4.27, which represents growth of 4% to 7% from $3.99 in 2018. Its effective tax rate has been forecasted to be in the range of 23.5% to 24.5%.

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

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