Altria Q2 Earnings: Marlboro Volumes Fall, But Overall Market Share Remains Flat

Altria (NYSE:MO) announced its second quarter results on July 27th, beating EPS expectations, but missing out on revenue. While adjusted EPS grew 9.5% over the second quarter of the previous year, the revenues remained largely flat at $4.88 billion. The decline of 5.5% in the shipment volume of the company’s main brand, Marlboro, reflecting the decline in the industry and trade inventory movements, coupled with a 0.1 percentage point decline in its market share, were a drag on the revenue. The overall market share of the company remained flat, with growth in the share of its discount brands. Higher cigarette prices and cost cuts implemented by the company helped to bolster the earnings.

The decline in the smokeable segment is putting pressure on the company to generate greater earnings from its smokeless products segment, which delivered a solid performance in the quarter. Strong share growth of the company’s Copenhagen brand helped to grow volume. The national expansion of Copenhagen Mint at retail aided in a nearly three point gain in the brand’s retail share. In e-vapor, the company’s main brand MarkTen XL has captured nearly 50% of the e-vapor category volume in mainstream channels, including C-stores. The company is also teaming up with Philip Morris International (NYSE:PM) to create lower-risk tobacco products. PMI’s application to the FDA for pre-market authorization, and a modified-risk tobacco product designation to its iQOS technology, remains on track. This technology has the potential to be a game-changer in the US market. The Wine segment of MO also performed strongly, with volume growth seen in its premium wines.

Altria also raised its outlook for the year, saying it expects adjusted earnings of $3.01 to $3.07, up from $3 to $3.05 per share. The company had, earlier in the year, stated its intentions of cutting $300 million in annual expenses by the end of 2017, by focusing on reducing SG&A costs and creating a leaner organization structure. The company is also set to benefit from a sweetened offer for SABMiller, in which Altria has a ~27% stake, by AB InBev, which raised its cash offer from £44 a share to £45, after the massive decline in the value of the pound, in the aftermath of the Brexit. However, currently the deal isn’t guaranteed, as SABMiller’s management has suspended work on the integration, while it deliberates whether the new offer is acceptable.

Have more questions on Altria? Have a look at the links below:

• How Will Altria Perform In Q2 2016?
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• What Can Lead To A 10% Downside In Altria’s Valuation In The Next Few Years?
• Which Is A Better Dividend Bet – Altria Or Philip Morris?
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• What Will Be Altria’s Revenue And EBITDA Breakdown In 2016?
• What Are Altria’s Strategies For Long-Term Growth?
• How Will Altria Perform In 2016?
• How Will The New FDA Ruling On E-Cigarettes Help Altria?
• What Is The State Of The Vapor Market In The U.S.?
• How Did The Different Segments Of Altria Perform In Q1 2016?
• Impressive Growth In The Smokeable Products Segment Helps Altria Beat Estimates
• How Will Altria Perform In Q1 2016?
• What Are Altria’s Strengths Driving Long-Term Growth?
• What Are Some Obstacles To Altria’s Long-Term Growth?
• How Will Altria’s Revenue And EBITDA Change In The Next 3 Years?
• How Has Altria’s Revenue And EBITDA Composition Changed In The Last 5 Years?
• Altria: Year 2015 In Review
• How Has Altria’s Shipment Volume, By Brand, Changed Over The Past 3 Years?
• How Has Altria’s Retail Share In Smokable Products And Smokeless Products Changed Over The Last Year?
• What is Altria’s Revenue And EBITDA Breakdown?
• What is Altria’s Fundamental Value Based On Expected 2016 Results?
• By What Percentage Did Altria’s Revenue & EBITDA Grow In The Last 5 Years?

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