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We expect tobacco giant Altria Group Inc. (MO - Analyst Report) to beat expectations when it reports fourth quarter and full year fiscal 2012 results on Jan 31 before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Altria is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), stands at +1.85%.This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks #2 Rank (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.  Altria currently retains a Zacks Rank #2 (Buy).

The combination of the stock’s Zacks Rank #2 (Buy) and +1.85% ESP makes us highly confident of a positive earnings beat on Jan 31.

What is Driving the Better-than-Expected Earnings?

Altria’s underlying business is gaining momentum with its leading market share in tobacco industry, efficient cost management, new product launches, and a flourishing smokeless segment.

It delivered solid earnings results in both second and third which were well ahead of prior year quarter earnings. Altria posted positive surprises for fourth quarter of 2011 and second quarter of 2012 and matched expectations in the first quarter and third quarter of 2012, which brings the average  earnings surprise to 2.78%.

Altria’s flagship brand Marlboro continues to occupy a leading position in the tobacco industry. Moreover, the company enriches its brand value through aggressive promotions and new product launches which is expected to boost earnings in the near future.

The efficient cost management of the company coupled with a major share in the industry enables the company to dictate price in the smokeable segment of the tobacco industry. The smokeless segment is also expected to back robust earnings with leading brands like Copenhagen and Skoal.  

Overall, Altria has a bright prospect for fiscal 2013, expecting continued robust consolidated operating margin and earnings improvement in the year ahead.

Other Stocks to Consider

Altria is not the only bullish firm in the consumer staples segment this earnings season. We also see likely earnings beats coming from the following industry peers:

J.M. Smucker Co. (SJM - Analyst Report): Earnings ESP of +0.73% and Zacks Rank #2 (Buy).

Green Mountain Coffee Roasters Inc. (GMCR - Analyst Report): Earnings ESP of +3.08% and Zacks Rank #2 (Buy).

Reynolds American, Inc. (RAI - Analyst Report): Earnings ESP of +1.35% and Zacks Rank #3 (Hold).

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