01—Abstract
Summary
Summary of the 10-Q filed July 26, 2018. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported solid financial results for the first half of 2018, with net earnings attributable to Altria increasing by 11.2% to $3,770 milliona, and diluted EPS rising by 13.7% to $1.99 compared to the same period in 2017.
This growth was primarily driven by a lower effective tax rate following the U.S. Tax Cuts and Jobs Act of 2017 and an increase in earnings from its equity investment in AB InBev. Despite a slight decline in net revenues, primarily due to lower shipment volumes in the smokeable products segment, the company's operational performance remained strong, supported by higher pricing and positive contributions from the smokeless products segment. Altria continued its commitment to shareholder returns through dividend payments and share repurchases, demonstrating a focus on balancing growth investments with returning capital to shareholders.
The company raised its full-year 2018 adjusted diluted EPS growth guidance to 16%b-19%. Key strategic areas for investment include innovative product development, regulatory science, and brand equity. While facing ongoing challenges such as regulatory scrutiny, litigation, and excise taxes, Altria's diversified portfolio and strategic initiatives position it to navigate the evolving market landscape.
02—Key points
Key Highlights
- Net earnings attributable to Altria increased by 11.2% to $3,770 million for the first six months of 2018 compared to the same period in 2017.
- Diluted EPS attributable to Altria grew by 13.7% to $1.99 for the first six months of 2018.
- The company raised its full-year 2018 adjusted diluted EPS growth guidance to 16%-19%.
- Smokeable products segment experienced a decline in net revenues and operating companies income due to lower shipment volumes, though pricing increases provided some offset.
- Smokeless products segment showed growth in net revenues and operating companies income, driven by higher pricing and the favorable impact of a prior year recall.
- Altria's equity investment in AB InBev contributed positively to earnings, benefiting from special items related to the Tax Reform Act and merger activities.
- Altria completed its $4.0 billion share repurchase program and continued executing a new $2.0 billion share repurchase program, demonstrating a commitment to returning capital to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2018, Altria Group, Inc. kept $0.30.
- Revenue$6.30B100.0%
- Cost of revenue−$3.16B50.2%
- Gross profit$3.14B49.8%
- Operating costs−$643.0M10.2%
- Operating income$2.50B39.6%
- Interest, other & tax−$622.0M9.9%
- Net income$1.88B29.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed July 26, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $6.30B$6.66B | −5.4% |
| Cost of Revenue | $1.74B$1.95B | −10.8% |
| Gross Profit | $3.14B$3.11B | +0.9% |
| Operating Income | $2.50B$2.53B | −1.2% |
| Net Income | $1.88B$1.99B | −5.7% |
| EPS (Basic) | $0.99$1.03 | −3.9% |
| EPS (Diluted) | $0.99— | — |
| Shares Outstanding (Basic) | 1.89B1.93B | −1.9% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Altria's earnings growth in the first half of 2018?
Altria's earnings growth was primarily driven by a lower effective tax rate resulting from the Tax Cuts and Jobs Act of 2017 and increased earnings from its equity investment in AB InBev. Operational improvements, including higher pricing across segments and a favorable impact from the smokeless products segment, also contributed.
How did the smokeable products segment perform compared to the previous year?
The smokeable products segment experienced a decline in net revenues and operating companies income due to lower shipment volumes, particularly in cigarettes, which fell by 7.6% for the first six months. However, higher pricing and a reduction in promotional investments partially offset these declines.
What is Altria's outlook for the remainder of 2018?
Altria raised its full-year 2018 adjusted diluted EPS growth guidance to a range of 16% to 19%. This updated guidance reflects strategic investments in areas like innovative product development and brand equity.
How is Altria managing its capital returns to shareholders?
Altria demonstrated its commitment to shareholder returns by increasing its quarterly dividend by 6.1% and continuing its share repurchase program. The company completed its prior share repurchase program and is actively executing a new one, signaling confidence in its financial position and future cash flow generation.
06—Continue