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Altria's (MO) Q3 Earnings Miss Estimates on Soft Volumes
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Altria Group Inc. (MO - Free Report) delivered third-quarter 2023 results, wherein the bottom line missed the Zacks Consensus Estimate and came in line with the year-ago period. The company continued to benefit from pricing power, whereas soft domestic shipment volumes, especially in the smokeable product segment, remained a downside.
Quarter in Detail
Adjusted earnings came in at $1.28 per share, which remained flat year over year and fell a penny short of the Zacks Consensus Estimate of $1.29. The reduced number of shares outstanding was negated by a decline in adjusted operating companies income (OCI).
Altria Group, Inc. Price, Consensus and EPS Surprise
Net revenues fell 4.1% year over year to $6,281 million, mainly due to reduced net revenues in the smokeable product unit. After deducting excise taxes, revenues were down 2.5% to $5,277 million. The Zacks Consensus Estimate for revenues was pegged at $5,480 million.
On Jun 1, 2023, Altria concluded the buyout of NJOY Holdings Inc. In the third quarter of 2023, ACE generated reported shipment volumes of about 7.5 million pods.
Segment Details
Smokeable Products: Net revenues in the category decreased 5.3% year over year to $5,572 million due to the reduced shipment volume and increased promotional investments, partly compensated by greater pricing. Revenues, net of excise taxes, fell 3.7%. The consensus mark for segment revenues was pegged at $5,744 million for the quarter under review.
Domestic cigarette shipment volumes tumbled 11.6%, mainly due to the industry’s decline rate and retail share losses, trade inventory movements and calendar differences. The industry’s decline was a result of macroeconomic pressure on Adult Tobacco Consumers’ (“ATC”) disposable income and increases in illegitimate e-vapor products.
On adjusting for trade inventory movements, calendar differences and other factors, the total estimated domestic cigarette industry volume fell an estimated 8%. Altria’s reported cigar shipment volumes rose 2.7%.
Adjusted OCI in the segment declined 2.5% to $2,741 million, with higher pricing being more than offset by reduced shipment volumes, elevated promotional investments and escalated costs. However, adjusted OCI margins grew 0.7 percentage points to 59.6%.
Oral Tobacco Products: Net revenues in the segment rose 2.2% from the year-ago quarter’s level to $685 million. The upside can be attributed to improved pricing and reduced promotional investments, partly negated by the increased percentage of on! shipment volumes relative to MST (compared with the year-ago period) and reduced MST shipment volumes. Revenues, net of excise taxes, grew 2.7%. The Zacks Consensus Estimate for the segment’s revenues stood at $670 million for the third quarter.
Domestic shipment volumes fell 3.3%, mainly due to retail share losses in MST and calendar differences. This was somewhat offset by the industry’s growth rate and other aspects. On adjusting for calendar differences, the oral tobacco product segment’s shipment volume declined by an estimated 2%.
Adjusted OCI rose 7.1% to $455 million, mainly due to increased pricing, reduced costs and a decline in promotional investments, somewhat negated by the changed mix and reduced MST shipment volumes. Adjusted OCI margins climbed 2.9 percentage points to 69.3%.
Other Updates
Altria ended the quarter with cash and cash equivalents of $1,537 million, long-term debt of $23,977 million and a total stockholders’ deficit of $3,407 million.
MO repurchased 5.9 million shares for $260 million in the third quarter of 2023. Altria bought back 16.3 million shares for $732 million through the first nine months of 2023. As of Sep 30, 2023, the company had shares worth $268 million remaining under its repurchase program, which is anticipated to be concluded by Dec 31, 2023.
In the third quarter, the company paid out dividends of $1.6 billion. In the first nine months of 2023, it paid out dividends worth $5 billion. Management announced a 4.3% hike in its quarterly dividend in August 2023, marking its 58th dividend increase in the past 54 years.
Guidance
Altria’s results reflect its resilience amid a tough macroeconomic landscape, with ATC spending patterns being affected by overall inflation. Management narrowed its guidance range for 2023. It now envisions the adjusted EPS in the range of $4.91-$4.98, indicating growth of 1.5-3% from the $4.84 recorded in 2022. Earlier, management projected adjusted EPS in the band of $4.89-$5.03, suggesting growth of 1-4%.
As the external landscape remains dynamic, MO continues assessing economic factors like elevated inflation, higher interest rates, global supply-chain hurdles and ATC dynamics, such as purchasing patterns, the adoption of smoke-free products and disposable income.
The bottom-line view also considers planned investments associated with costs to improve the digital consumer engagement system and enhanced smoke-free product research, development and marketplace activities to support MO’s smoke-free products (including investments related to the commercialization of ACE in the United States).
Shares of this Zacks Rank #4 (Sell) company have dropped 4% in the past three months compared with the industry’s decline of 7%.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers.
The J. M. Smucker Company (SJM - Free Report) , a branded food and beverage product company, currently carries a Zacks Rank #2 (Buy). SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the corresponding year-ago reported figure.
Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently carries a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales suggests growth of 13.2% from the corresponding year-ago reported figure.
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Altria's (MO) Q3 Earnings Miss Estimates on Soft Volumes
Altria Group Inc. (MO - Free Report) delivered third-quarter 2023 results, wherein the bottom line missed the Zacks Consensus Estimate and came in line with the year-ago period. The company continued to benefit from pricing power, whereas soft domestic shipment volumes, especially in the smokeable product segment, remained a downside.
Quarter in Detail
Adjusted earnings came in at $1.28 per share, which remained flat year over year and fell a penny short of the Zacks Consensus Estimate of $1.29. The reduced number of shares outstanding was negated by a decline in adjusted operating companies income (OCI).
Altria Group, Inc. Price, Consensus and EPS Surprise
Altria Group, Inc. price-consensus-eps-surprise-chart | Altria Group, Inc. Quote
Net revenues fell 4.1% year over year to $6,281 million, mainly due to reduced net revenues in the smokeable product unit. After deducting excise taxes, revenues were down 2.5% to $5,277 million. The Zacks Consensus Estimate for revenues was pegged at $5,480 million.
On Jun 1, 2023, Altria concluded the buyout of NJOY Holdings Inc. In the third quarter of 2023, ACE generated reported shipment volumes of about 7.5 million pods.
Segment Details
Smokeable Products: Net revenues in the category decreased 5.3% year over year to $5,572 million due to the reduced shipment volume and increased promotional investments, partly compensated by greater pricing. Revenues, net of excise taxes, fell 3.7%. The consensus mark for segment revenues was pegged at $5,744 million for the quarter under review.
Domestic cigarette shipment volumes tumbled 11.6%, mainly due to the industry’s decline rate and retail share losses, trade inventory movements and calendar differences. The industry’s decline was a result of macroeconomic pressure on Adult Tobacco Consumers’ (“ATC”) disposable income and increases in illegitimate e-vapor products.
On adjusting for trade inventory movements, calendar differences and other factors, the total estimated domestic cigarette industry volume fell an estimated 8%. Altria’s reported cigar shipment volumes rose 2.7%.
Adjusted OCI in the segment declined 2.5% to $2,741 million, with higher pricing being more than offset by reduced shipment volumes, elevated promotional investments and escalated costs. However, adjusted OCI margins grew 0.7 percentage points to 59.6%.
Oral Tobacco Products: Net revenues in the segment rose 2.2% from the year-ago quarter’s level to $685 million. The upside can be attributed to improved pricing and reduced promotional investments, partly negated by the increased percentage of on! shipment volumes relative to MST (compared with the year-ago period) and reduced MST shipment volumes. Revenues, net of excise taxes, grew 2.7%. The Zacks Consensus Estimate for the segment’s revenues stood at $670 million for the third quarter.
Domestic shipment volumes fell 3.3%, mainly due to retail share losses in MST and calendar differences. This was somewhat offset by the industry’s growth rate and other aspects. On adjusting for calendar differences, the oral tobacco product segment’s shipment volume declined by an estimated 2%.
Adjusted OCI rose 7.1% to $455 million, mainly due to increased pricing, reduced costs and a decline in promotional investments, somewhat negated by the changed mix and reduced MST shipment volumes. Adjusted OCI margins climbed 2.9 percentage points to 69.3%.
Other Updates
Altria ended the quarter with cash and cash equivalents of $1,537 million, long-term debt of $23,977 million and a total stockholders’ deficit of $3,407 million.
MO repurchased 5.9 million shares for $260 million in the third quarter of 2023. Altria bought back 16.3 million shares for $732 million through the first nine months of 2023. As of Sep 30, 2023, the company had shares worth $268 million remaining under its repurchase program, which is anticipated to be concluded by Dec 31, 2023.
In the third quarter, the company paid out dividends of $1.6 billion. In the first nine months of 2023, it paid out dividends worth $5 billion. Management announced a 4.3% hike in its quarterly dividend in August 2023, marking its 58th dividend increase in the past 54 years.
Guidance
Altria’s results reflect its resilience amid a tough macroeconomic landscape, with ATC spending patterns being affected by overall inflation. Management narrowed its guidance range for 2023. It now envisions the adjusted EPS in the range of $4.91-$4.98, indicating growth of 1.5-3% from the $4.84 recorded in 2022. Earlier, management projected adjusted EPS in the band of $4.89-$5.03, suggesting growth of 1-4%.
As the external landscape remains dynamic, MO continues assessing economic factors like elevated inflation, higher interest rates, global supply-chain hurdles and ATC dynamics, such as purchasing patterns, the adoption of smoke-free products and disposable income.
The bottom-line view also considers planned investments associated with costs to improve the digital consumer engagement system and enhanced smoke-free product research, development and marketplace activities to support MO’s smoke-free products (including investments related to the commercialization of ACE in the United States).
Shares of this Zacks Rank #4 (Sell) company have dropped 4% in the past three months compared with the industry’s decline of 7%.
3 Solid Consumer Staple Picks
Lamb Weston (LW - Free Report) , which offers frozen potato products, currently sports a Zacks Rank #1 (Strong Buy). LW delivered an earnings surprise of 46.2% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 27.8% and 21.8%, respectively, from the year-ago reported numbers.
The J. M. Smucker Company (SJM - Free Report) , a branded food and beverage product company, currently carries a Zacks Rank #2 (Buy). SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal-year earnings suggests growth of 8.9% from the corresponding year-ago reported figure.
Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently carries a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 59.6%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales suggests growth of 13.2% from the corresponding year-ago reported figure.