Altria (MO) First Quarter Earnings and Revenue Key Estimates, Pricing Aids

Altria Group Inc. MO released results for the first quarter of 2022, in which the top and bottom lines exceeded the Zacks consensus estimate and the latter rose year-over-year. Price increases remained a benefit, although low volumes were a concern.

Quarter in detail

Adjusted earnings came in at $1.12 per share, up 4.7% year over year and beating Zacks’ consensus estimate of $1.09. The year-over-year increase was supported by higher adjusted earnings from operating companies (OCI), fewer shares outstanding and lower interest expense. These benefits were partially offset by lower adjusted earnings resulting from the Company’s investment in ABI.

Altria Group, Inc. Price, Consensus, and EPS Surprise

Altria Group, Inc. price-consensus-eps-surprise-chart | Altria Group, Inc. Quote

The Zacks No. 4 (sales) company’s net revenue fell 2.4% year-over-year to $5,892 million due to a lack of revenue from the wine segment, which has was divested in October 2021. Excluding the wine segment, net revenues were virtually unchanged year-on-year. year. Net of excise taxes, revenue decreased 1.3% to $4,819 million. Zacks’ consensus estimate for revenue was pegged at $4,804 million.

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Segment details

Smokable products: Net revenue for the category increased 0.3% year-over-year to $5,265 million due to higher pricing and reduced promotional investments. This was somewhat negated by reduced shipping volume. Revenues, net of excise duties, increased by 2.2%.

Domestic cigarette shipment volumes were down 6.3% year-over-year, primarily due to the rate of industry decline and retail market share losses, somewhat offset by movement of commercial stocks. Adjusting for trade inventory movements and other factors, domestic shipment volumes of smoking product cigarettes fell by approximately 8%. Cigar shipment volumes reported by Altria were down 9.6%. The total retail share of cigarettes remained unchanged at 49% year over year.

Adjusted OCI in the segment increased 5.7% to $2,511 million due to higher pricing and reduced promotional investments, partially offset by lower shipment volumes and increased settlement fee per unit. The adjusted OCI margin increased by 2 percentage points to 59.5%.

Oral tobacco products: The segment’s net revenue decreased 2.1% from the year-ago quarter level to $613 million due to increased promotional investment in on! and a mix shift between MST and on! shipping volumes leading to the increase in the percentage of on! volumes compared to the period of the previous year. This was somewhat offset by higher prices. Revenue, net of excise taxes, fell 1.8% to $584 million.

Segment domestic shipment volumes decreased 1.9%, primarily due to trade inventory movements and market share losses, partially offset by industry growth rate and timing differences, between other factors. After adjusting for trade inventory movements and timing differences, shipment volumes of oral tobacco products remained unchanged. The total market share of oral tobacco products decreased by 1.1 percentage points to 46.9%.

Adjusted OCI decreased 5.1% to $407 million due to high costs, increased promotional investments in on!, a change in mix and reduced shipment volumes. These were partially offset by an increase in prices. The adjusted OCI margin contracted by 2.4 percentage points to 69.7%.

On October 1, 2021, MO, through its subsidiary UST LLC, completed the sale of Ste. Michelle Wine Estates (Sainte-Michelle).

Financial updates

Altria ended the quarter with cash and cash equivalents of $5,353 million, long-term debt of $25,405 million and a total shareholder deficit of $1,760 million.

During the quarter, Altria repurchased 11.3 million shares for $576 million. As of March 31, 2022, Altria had shares worth approximately $1.2 billion remaining under its $3.5 billion share buyback program, which is expected to complete by March 31, 2022. December 31, 2022.

During the quarter, MO paid dividends worth $1.6 billion. The company maintains a long-term dividend payout ratio target of approximately 80% for adjusted earnings per share (EPS).

Other developments and tips

Russia’s invasion of Ukraine has worsened the scenario of rising global energy prices, which, combined with other macroeconomic factors such as supply-demand imbalances and labor shortages labor, has led to a historic spike in the rate of inflation. Apart from this, the volatility caused by the pandemic continues to impact the global economy in terms of supply chain bottlenecks and changing consumer behavior.

Altria noted that its tobacco business has not experienced any material disruption related to the pandemic. For 2022, the company is looking for adjusted earnings of between $4.79 and $4.93 per share. Net income indicates growth of 4-7% from the $4.61 recorded in 2021. The company expects net income to be weighted towards the second half of the year. Management said the company will continue to assess external environmental factors such as global supply chain barriers, high inflation, adult tobacco consumers or ATC dynamics, buying habits , the adoption of smokeless products, the impacts of the Russian invasion of Ukraine, disposable income and opportunities for tobacco consumption, among others.

The net result also takes into account planned investments associated with the costs of improving the digital consumer engagement system, improving research on smoke-free products, development and regulatory readiness expenses, and market activities. to support the company’s smoke-free products. The view also includes anticipating inflation of master settlement agreement expenses and direct material costs. MO does not expect PM USA to have access to the IQOS system in 2022. On November 29, 2021, the import ban and cease and desist orders imposed by the International Trade Commission on the IQOS device, Marlboro HeatSticks and infringing components went into effect. effect.

Shares of the company are up 9.8% over the past three months, versus 1.7% for the industry.

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Zacks’ consensus estimate for Sysco’s current-year sales and EPS suggests growth of 30.4% and 120.1%, respectively, from the number reported a year ago. SYY has a last four quarter earnings surprise of 3.7% on average.

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Zacks’ consensus estimate for McCormick’s current-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the figure reported a year ago. MKC has a four-quarter earnings surprise of around 1.3% on average.

Inter Parfums, which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently carries a Zacks Rank #2. Shares of Inter Parfums have fallen 17.4% over the past three months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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