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Altria in Q3: What Analysts Expect from Its Earnings

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Altria (MO) is scheduled to report its third-quarter earnings results on October 31. Analysts expect its earnings to continue to improve YoY (year-over-year). However, lower domestic cigarette shipment volumes could continue to hurt its top line.

Like Philip Morris (PM), Altria’s third-quarter revenue could gain from higher pricing. However, analysts’ estimate suggests that Altria’s revenue growth rate could moderate sequentially. We expect its domestic cigarette shipment volumes (adjusted for trade inventories and other factors) to continue to slide, affecting its revenue.

Despite Altria’s soft sales outlook, analysts expect its earnings to continue to improve YoY, reflecting a lower outstanding share count.

What analysts expect for Altria

Wall Street expects Altria to post third-quarter revenue of $5.34 billion, implying a YoY rise of about 1%. This growth projection is lower than the increase the company saw in the second quarter. It’s also lower than Philip Morris’s revenue growth of 1.8% in the third quarter. Philip Morris posted third-quarter revenue of $7.64 billion driven by increased pricing and growth in heated tobacco units. However, it registered a 5.9% decrease in its cigarette shipment volumes.

Analysts expect Altria to post adjusted EPS of $1.15 in the third quarter, implying YoY growth of 6.5%. In comparison, Philip Morris beat Wall Street’s earnings estimate by a wide margin in the quarter. Philip Morris posted adjusted EPS of $1.43, coming in ahead of analysts’ expectation of $1.36. However, its investments in reduced-risk products remained a drag on its third-quarter earnings. PM’s adjusted EPS fell 0.7% YoY in the period.

Second-quarter performance

Altria beat analysts’ consensus estimate during its second quarter. It posted revenue of $4.88 billion, a rise of 6.4%, led by higher net pricing. Promotions supported its top line growth, but its cigarette shipment volumes (adjusted for trade inventories and other factors) dropped 7.0% YoY.

Altria’s adjusted EPS of $1.10 increased by about 9% in the quarter, reflecting share buybacks. However, its EPS fell short of analysts’ consensus estimate of $1.11. An increase in interest expenses hurt Altria’s bottom line growth.

A total of 47.0% of the analysts covering Altria stock suggest “buys,” and 53.0% recommend “holds” ahead of its third-quarter earnings announcement. Analysts’ consensus target price of $52.68 indicates a 14.6% upside in MO based on its closing price of $45.99 on October 28.

On a YTD (year-to-date) basis, Altria stock is down 6.9% and is lagging Philip Morris by a wide margin. Philip Morris stock is up 23.0% YTD.

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