Published January 14, 2015
Altria Group Inc. (MO), whose products range from Marlboro cigarettes to Kraft macaroni and cheese, on Tuesday said second-quarter profit rose 7.8 percent, boosted by the weaker dollar and a lower tax rate.
Altria, the parent of Philip Morris and Kraft Foods Inc. (KFT), said earnings rose to $2.63 billion, or $1.27 per share, in the quarter, from $2.44 billion, or $1.20 per share, a year earlier.
Analysts expected New York-based Altria to earn $1.24 to $1.31 per share, with a mean target of $1.28, according to Reuters Estimates.
"Really kind of a blah quarter for Altria — some decent things, nothing great, in our view," said Prudential analyst Rob Campagnino, who rates Altria "neutral weight."
"If we owned shares we wouldn't sell because of anything we heard today, and we wouldn't be in a big hurry to run out and buy them either," he said.
Shares of Altria, which have been volatile amid a string of successes and setbacks in U.S. tobacco litigation over recent months, slipped 5 cents to $48.78 on the New York Stock Exchange. The shares, a component of the Dow Jones industrial average, reached $58.96 in March, their highest level in over five years.
Philip Morris USA (search) shipped 48.6 billion cigarettes in the quarter, up 0.9 percent from a year earlier. Marlboro, the world's top brand, grew its U.S. market share 1.8 percentage points to 39.6 percent.
Over the past several months, Philip Morris and other players in the U.S. market have promoted their brands and offered discounts to attract consumers who had been switching to "deep discount" cigarettes after tax increases pushed retail prices higher.
"If you compare the level of promotion, say, to the same time last year, it's roughly flat, it's not been growing like it was in earlier periods," Chief Financial Officer Dinyar Devitre said during a conference call.
He said the deep discount segment has declined, but added, "I've got to say that it's still competitive out there."
Philip Morris International's shipments climbed 2.8 percent to 192.7 billion cigarettes. Market share gains in several countries helped offset pressure in Germany and Italy.
Altria reiterated its forecast for 2004 earnings of $4.50 to $4.60 per share and said profit could come in at the high end of that range if exchange rates stay at current levels.
The forecast includes the special items such as charges for the restructuring of Kraft Foods and for a cigarette smuggling agreement with the European Commission, and the impact of an expected lower tax rate.
Analysts expect Altria to earn $4.79 to $4.92 this year, with a mean target of $4.84, excluding items, according to Reuters Estimates.
On Monday, Kraft reported its second-quarter profit fell 26 percent to $698 million, or 41 cents a share, as costs for dairy products and marketing rose. Northfield, Ill.-based Kraft also cut its full-year profit forecast.
Altria, as expected, took a pretax charge of $250 million in the second quarter for its initial payment to the European Commission (search). In all, Altria agreed to pay $1.25 billion over 12 years to fight contraband cigarettes and end legal disputes with the European Union over smuggling charges.
The quarter included 13 cents per share in charges related to restructuring at Kraft and the agreement with the European Commission. It also included a 15 cents per share benefit from a lower effective tax rate and 5 cents per share due to the impact of the weak dollar.
Revenue rose 10.5 percent to $23.01 billion.