Altria Meets Earnings Estimates, Misses on Revenue

Today, Altria Group (NYSE:MO) reported its fourth-quarter earnings, which ended on December 31. For the quarter, the company reported revenue of $6.0 billion. However, net of excise taxes, the company’s revenue was $4.80 billion, which fell short of analysts’ expectation of $4.88 billion. However, Altria’s adjusted EPS was $1.02, which was in line with analysts’ expectations. Following the company’s fourth-quarter earnings, management lowered its adjusted EPS growth guidance from 2020 to 2022. Altria stock fell due to weak sales and lower EPS growth guidance. The company was trading 1.2% lower in pre-market trading.

Altria’s fourth-quarter revenue

Compared to the total revenue of $6.11 billion in the fourth quarter of 2018, Altria’s revenue fell 1.8% during the quarter. However, the company’s revenue, net of excise tax, increased by 0.3% YoY. The company’s revenue increased due to higher sales in the smokeless and wine segments. However, a decline in the smokeable segment’s sales offset some of the increases.

During the fourth quarter, Altria’s smokeable segment reported revenue, net of excise tax, of $3.99 billion. The revenue fell 0.5% from $4.01 billion in the fourth quarter of 2018. The segment’s revenue fell due to the decline of 8.7% in the domestic cigarette shipment volume. However, during the same period, cigar shipments increased by 4.6%. Also, favorable pricing and lower promotional expenses offset some of the declines in the segment’s revenue.

During the quarter, the revenue, net of excise tax, from the smokeless segment increased by 6.1% to $574 million. The segment’s revenue increased due to favorable pricing and lower promotional expenses. However, the lower shipment volume offset some of the declines. During the same period, the smokeless products segment’s shipment volume fell by 4.0%. In the wine segment, the revenue rose 2.0% on a YoY basis to $200 million. The higher shipment volume drove the segment’s revenue.

Altria’s fourth-quarter EPS

Altria reported a loss of $1.0 per diluted share. However, removing one-time or special items, the company’s adjusted EPS was $1.02. The adjusted EPS increased by 7.4% from $0.95 in the fourth quarter of the previous year. The company’s EPS increased due to higher OCI (operating companies income) from the smokeable and smokeless products segments and a higher contribution from the company’s investment in AB InBev. However, higher interest expenses offset some of the increases.

During the quarter, Altria wrote down $4.1 billion of its investment in JUUL due to an increase in its pending legal cases. The company also expects more cases against JUUL. In 2018, Altria invested $12.8 billion for a 35% stake in JUUL. Altria has written down a total of $8.6 billion of its investment in JUUL. As of December 31, the company’s investment in JUUL was $4.2 billion.

Outlook

For 2020, Altria’s management expects its EPS to be $4.39–$4.51, which represents growth of 4%–7% from $4.22 in 2019. The guidance considers an increased investment in the commercialization of iQOS, an extra day of shipping, and Helix’s plans to produce on!, oral nicotine pouches, at its Richmond Manufacturing Center, and also expand its distribution in the US. Management expects the total domestic cigarette industry volume for 2020 to fall by 4% to 6%.

Earlier, Altria’s management expected its compounded annual adjusted diluted EPS to grow by 5%–8% from 2020 to 2022. However, they lowered the guidance to 4%–6% due to no equity contribution from JUUL until 2022.

Stock performance

After falling 0.6% in 2019, Altria has returned 2% this year as of Wednesday. In March 2019, Altria completed the acquisition of a 45% stake in Cronos Group (NASDAQ:CRON). The company also owns warrants that, if excised, could raise its ownership to 55%. Read Cronos and Altria’s Deal: Does It Make Sense Now? to learn more. Meanwhile, Philip Morris International (NYSE:PM) delivered strong returns of 27.5% in 2019. However, Philip Morris has lost 1.3% of its stock value this year.