Altria Group Inc.’s (MO) adjusted earnings of 54 cents per share in the first quarter of 2013 missed the Zacks Consensus Estimate by a penny. The results exceeded the prior-year quarter results of 49 cents by 10.2%. The upswing in earnings came from positive pricing, higher earnings from Altria's equity investment in SABMiller and lower interest expense.
Revenues and Margins
Altria’s total revenue declined 2.1% year over year to $5.5 billion in the quarter due to lower sales of smokeable products. Revenues net of excise taxes increased 0.5% to $4.0 billion for the period. Revenues matched the Zacks Consensus Estimate.
In the quarter, gross profit surged 21.5% to $2.7 billion compared with the prior-year quarter as revenues has declined because of tight cost management. Operating companies’ income (operating income after operating expenses are deducted, but before income taxes and interest are deducted) shot up 30.3% year over year to $2.2 billion on the back of disciplined cost saving initiatives, under Altria’s cost reduction program.
Segment Details
Effective Jan 1, 2013, the company’s reportable segments are Smokeable Products, Smokeless Products and Wine. The financial services business and the alternative products business will be reported as All Other category.
Smokeable Products Segment: Net revenue for the smokeable segment slipped 2.6% year over year to $5.0 billion, primarily attributable to lower shipment volumes. Revenues net of excise tax declined 1.0% to $3.44 billion.
Furthermore, adjusted operating companies’ income increased 1.3% year over year to $1.4 billion, reflecting higher pricing and cost management. Operating companies’ income margin inflated 0.9 percentage points (pp) to 41.9% from the year-ago period.
Shipment volume in the quarter slipped 5.2% to 29.8 billion stocks compared with the prior-year quarter, primarily due to one less shipping day in the year and a 3.2 pp decline in retail share of cigars.
Smokeless Products: Net revenue in Smokeless Products increased 2.6% to $390 million, fueled by higher volume and pricing. Revenues net of excise tax went up 3.1% to $364 million.
Furthermore, adjusted operating companies’ income increased 5.2% year over year to $222 million. Smokeless products’ first-quarter shipment volume went up 3.4% to 175.7 million units on the back of volume growth in the Copenhagen brand.
Wine: The segment’s net revenue surged 11.5% to $126 million in the quarter, while revenues net of excise tax went up 11.0% year over year to $121 million on the back of higher shipment volume. Wine shipment volume went up 9.5% to $1.7 million units, driven by expansion in off-premise channels.