10-QPeriod: Q1 FY2017

ALTRIA GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 2, 2017For Securities:MO

Summary

Altria Group, Inc. reported solid financial results for the first quarter of 2017, with net earnings attributable to Altria Group, Inc. increasing by 15.1% to $1,401 million, or $0.72 per diluted share, up from $1,217 million, or $0.62 per diluted share, in the prior year's quarter. This growth was primarily driven by a 13.7% increase in operating income, fueled by stronger performance in the smokeable products segment, higher pricing across its portfolio, and lower litigation and settlement charges compared to the prior year. Despite a 5.0% decline in smokeless product shipment volume due to a voluntary product recall, the segment's net revenues saw a slight increase due to higher pricing. The company reaffirmed its full-year 2017 adjusted diluted EPS growth forecast of 7.5% to 9.5%. Altria continues to focus on returning value to shareholders, with significant share repurchases of $551 million during the quarter, alongside its ongoing dividend payments. The company's substantial investment in AB InBev also contributes to its financial performance, although it was negatively impacted by market conditions in Brazil and hedging losses in the current quarter.

Financial Highlights

45 data points
Beta

Revenue

$6.08B

45.6% Gross Margin

Net Income

$1.40B

23.0% Net Margin

EPS (Diluted)

$0.72

Total Assets

$46.17B

Cash & Equivalents

$5.23B

Free Cash Flow

$2.64B

Financial Statements
Beta
Revenue$6.08B
Cost of Revenue$1.81B
Gross Profit$2.78B
Operating Income$2.24B
Net Income$1.40B
EPS (Basic)$0.72
Shares Outstanding (Basic)1.94B

Key Highlights

  • 1Net earnings attributable to Altria Group, Inc. increased 15.1% to $1,401 million.
  • 2Diluted EPS increased 16.1% to $0.72 per share.
  • 3Smokeable products segment operating companies income increased by 16.6% driven by higher pricing and cost efficiencies.
  • 4Smokeless products segment experienced a 5.0% shipment volume decline, largely due to a product recall, but pricing increases helped mitigate the revenue impact.
  • 5The company repurchased $551 million of its common stock during the quarter.
  • 6Altria paid $1,187 million in dividends during the quarter, reflecting an increase in the dividend rate.
  • 7The company reaffirmed its 2017 full-year adjusted diluted EPS growth forecast of 7.5% to 9.5%.

Frequently Asked Questions

The increase in net earnings was primarily driven by higher operating income, particularly from the smokeable products segment due to higher pricing and cost efficiencies, coupled with lower tobacco and health litigation items and favorable NPM adjustment items compared to the prior year. Lower interest expenses also contributed positively.

The voluntary product recall in the smokeless products segment negatively impacted shipment volume by 5.0% and reduced operating companies income by an estimated $60 million for the quarter. However, higher pricing in the segment helped to offset some of the revenue decline.

Altria reaffirmed its expectation for a full-year 2017 adjusted diluted EPS growth rate in the range of 7.5% to 9.5% over 2016 full-year adjusted diluted EPS. The company anticipates stronger adjusted diluted EPS growth in the second half of the year.

Altria returned capital to shareholders through share repurchases, spending $551 million in the first quarter of 2017. The company also continued its regular dividend payments, totaling $1,187 million for the quarter, with a target dividend payout ratio of approximately 80% of adjusted diluted EPS.