Altria (MO) Q4 Earnings Match Estimates, Revenues Fall Y/Y

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Thu, Jan 27, 2022, 9:13 AM 7 min read

Adjusted earnings came in at $1.09 per share, which increased 10.1% year over year and met the Zacks Consensus Estimate. The year-over-year increase was backed by greater adjusted operating companies income (OCI), favorable net periodic benefit income as well as reduced number of shares outstanding. These upsides were partially countered by elevated income taxes.

Net revenues dipped 0.8% year over year to $6,255 million due to the lack of revenues from the wine segment (as a result of the timing of the wine business sale). Revenues, after deducting excise taxes, were up 0.6% to $5,086 million. The Zacks Consensus Estimate for revenues was pegged at $5,054 million.

Altria Group, Inc. Price, Consensus and EPS Surprise

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

Segment Details

Smokeable Products: Net revenues in the category rose 0.4% year over year to $5,591 million due to increased pricing, somewhat negated by a reduced shipment volume. Revenues, net of excise taxes, climbed 2.3%.

Domestic cigarette shipment volumes were down 5.9% year over year, mainly driven by the industry’s rate of decline as well as retail share losses, somewhat compensated by trade inventory movements. On adjusting for trade inventory movements, smokeable products’ domestic cigarette shipment volumes fell an estimated 8%. Altria’s reported cigar shipment volumes declined 6.9%. The total cigarette retail share decreased 0.8 percentage points to 48.3% year over year.

Adjusted OCI in the segment increased 4.9% to $2,504 million due to higher pricing, partly offset by reduced shipment volumes, a rise in resolution expenses and increased costs. Adjusted OCI margin increased 1.4 percentage points to 56.2%.

Oral Tobacco Products: Net revenues in the segment jumped 4.9% from the year-ago quarter’s level to $663 million due to greater pricing, somewhat negated by increased promotional investments in on!. Revenues, net of excise taxes, rose 4.8% to $629 million.

Domestic shipment volumes in the segment went up 1.8%, mainly due to the industry’s rate of growth and trade inventory movements, partly countered by retail share losses and calendar differences. On an adjusted basis, oral tobacco products shipment volumes went down an estimated 0.5%. The total oral tobacco products’ retail share fell 1.6 percentage points to 47.6%.

Adjusted OCI declined 5.3% to $390 million due to elevated costs, increased promotional investments in on! as well as a mix shift between MST and on! shipment volumes. Adjusted OCI margin contracted 6.7 percentage points to 62%.

On Oct 1, 2021, Altria, through its subsidiary — UST LLC — completed the divestiture of Ste. Michelle Wine Estates (Ste. Michelle).

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Financial Updates

Altria ended the quarter with cash and cash equivalents of $4,544 million, long-term debt of $26,939 million and a total stockholders’ deficit of $1,606 million.

Altria expects capital expenditures for 2022 in the range of $200-$250 million.

During the fourth quarter, MO bought back 15.5 million shares for $703 million. In full-year 2021, the company repurchased 35.7 million shares for $1.7 billion. As of Dec 31, 2021, Altria had shares worth roughly $1.8 billion remaining under its $3.5 billion share repurchase program, which is anticipated to conclude by Dec 31, 2022.

During the fourth quarter, the company paid out dividends worth $1.7 billion. In full-year 2021, it made dividend payouts of $6.4 billion. The company maintains a long-term dividend payout ratio goal of about 80% for adjusted earnings per share (EPS).

Other Developments & Guidance

On Nov 29, 2021, the importation ban and cease-and-desist orders forced by the International Trade Commission on the IQOS device, Marlboro HeatSticks and infringing components went into effect. The IQOS system is not available for sale any longer in the United States.

During the fourth quarter, the total U.S. oral tobacco category share for on! nicotine pouches increased to 3.9%, up 0.9 percentage points sequentially. As of Dec 31, 2021, Helix expanded its U.S distribution of on! to 117,000 retail stores. The company submitted pre-market tobacco product applications for the entire on! portfolio to the FDA, which currently remains pending. Helix is working on modified risk tobacco product applications for on!.

Altria noted that its tobacco business has not witnessed any material disruption related to the pandemic. The company continues to assess macroeconomic impacts of the pandemic on adult tobacco consumers (ATCs), such as stay-at-home trends, disposable income and buying patterns. The company also continues to assess the impacts of any supply-chain or distribution-related disruption.

For 2022, the company envisions an adjusted earnings view in the range of $4.79-$4.93 per share . The bottom line indicates growth of 4-7% from $4.61 recorded in 2021. The company expects the bottom line to be weighted toward the second half of the year. Management stated that the company will continue assessing external environmental factors like ATC dynamics, purchasing patterns, adoption of smoke-free products, disposable income and tobacco usage occasions among others.

The bottom line also takes into account planned investments associated with costs to improve the digital consumer engagement system, enhanced smoke-free product research, development and regulatory preparation expenses and marketplace activities to support the company’s smoke-free products. The view also includes the anticipation of inflation of Master Settlement Agreement expenses and direct material costs. Further, MO does not expect PM USA to have access to the IQOS system in 2022.

Shares of this Zacks Rank #4 Sell) company have rallied 11% in the past three months compared with the industry’s rise of 11.2%.

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