10-QPeriod: Q1 FY2018

ALTRIA GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 26, 2018For Securities:MO

Summary

Altria Group, Inc. reported a strong first quarter of 2018, with net earnings attributable to Altria Group, Inc. increasing by 35.2% to $1.9 billion, and diluted EPS rising 38.9% to $1.00 per share. This growth was primarily driven by a lower effective tax rate due to the Tax Cuts and Jobs Act, improved earnings from its investment in AB InBev, and stronger performance in the smokeless products segment. The company also demonstrated a commitment to shareholder returns by approving a 6.1% increase in its quarterly dividend to $0.70 per share and continuing its share repurchase program, having completed one $1 billion program and initiating another. Despite a slight decline in smokeable product volumes, Altria managed to offset this with pricing strategies and favorable NPM (Non-Participating Manufacturer) adjustment items, while the smokeless products segment showed robust growth. Overall, the results reflect a solid operational performance coupled with the significant benefit of tax reform, positioning the company favorably for the remainder of the year. Investors can look forward to continued dividend growth and capital returns, though the long-term challenges within the tobacco industry, including regulatory scrutiny and evolving consumer preferences, remain key considerations.

Financial Highlights

47 data points
Beta

Revenue

$6.11B

48.1% Gross Margin

Net Income

$1.89B

31.0% Net Margin

EPS (Diluted)

$1.00

Total Assets

$43.90B

Cash & Equivalents

$2.19B

Free Cash Flow

$2.77B

Financial Statements
Beta
Revenue$6.11B
Cost of Revenue$1.73B
Gross Profit$2.94B
Operating Income$2.32B
Net Income$1.89B
EPS (Basic)$1.00
EPS (Diluted)$1.00
Shares Outstanding (Basic)1.90B

Key Highlights

  • 1Net earnings attributable to Altria Group, Inc. increased by 35.2% to $1.9 billion in Q1 2018 compared to Q1 2017.
  • 2Diluted EPS increased by 38.9% to $1.00 per share, largely driven by tax reform and improved AB InBev investment earnings.
  • 3The company's effective tax rate decreased significantly to 23.2% from 33.0% due to the Tax Cuts and Jobs Act.
  • 4Altria increased its quarterly dividend by 6.1% to $0.70 per share, with an annualized rate of $2.80 per share.
  • 5Smokeable products segment operating income remained stable, with pricing increases offsetting lower shipment volumes and higher costs.
  • 6Smokeless products segment showed strong growth, with net revenues up 12.7% and operating companies income up 37.4%, benefiting from pricing and the prior year's product recall impact.
  • 7Altria reaffirmed its full-year 2018 adjusted diluted EPS growth forecast of 15% to 19%.

Frequently Asked Questions

Altria reported net revenues of $6.108 billion, a slight increase of 0.4% compared to $6.083 billion in Q1 2017. Net earnings attributable to Altria Group, Inc. significantly increased by 35.2% to $1.894 billion, or $1.00 per diluted share, up from $1.401 billion, or $0.72 per diluted share, in the prior year's quarter.

The Tax Cuts and Jobs Act significantly reduced Altria's effective tax rate from 33.0% in Q1 2017 to 23.2% in Q1 2018. This tax benefit was a primary driver of the substantial increase in net earnings and EPS for the quarter.

The smokeable products segment's operating income was stable, with pricing increases and favorable NPM adjustment items offsetting lower shipment volumes and higher costs. The smokeless products segment demonstrated strong growth, with increased net revenues and operating income due to pricing and the prior year's product recall impact. The wine segment saw a slight decrease in operating income due to higher SG&A costs and unfavorable premium mix.

Altria reaffirmed its full-year 2018 adjusted diluted EPS growth rate expectation to be in the range of 15% to 19% over 2017 full-year adjusted diluted EPS. The company also expects its full-year adjusted effective tax rate to be approximately 23% to 24%.