01—Abstract
Summary
Summary of the 10-Q filed October 25, 2018. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported strong financial performance for the nine months ended September 30, 2018, with net earnings attributable to Altria increasing by 8.7% to $5,713 milliona and diluted EPS rising by 11.0% to $3.02 compared to the same period in the prior year.
This growth was driven by a lower effective tax rate following the Tax Cuts and Jobs Act and an increase in earnings from its equity investment in AB InBev, which offset a prior year gain from the AB InBev/SABMiller business combination. The company also continued its commitment to shareholder returns, increasing its quarterly dividend by 21.2% year-to-date and repurchasing shares under its new $2.0 billionb share repurchase program. Despite a slight decline in net revenues, primarily due to lower shipment volumes in the smokeable products segment, Altria demonstrated robust pricing strategies and cost management.
The smokeless products segment showed growth in both net revenues and operating companies income. While the company faces ongoing challenges including regulatory pressures, litigation, and evolving consumer preferences, its strategic investments and focus on core brands position it to navigate these complexities. Investors will likely focus on the company's ability to continue growing dividends and managing its significant debt load and litigation risks.
02—Key points
Key Highlights
- Net earnings attributable to Altria increased by 8.7% to $5,713 million for the nine months ended September 30, 2018.
- Diluted EPS attributable to Altria grew by 11.0% to $3.02 for the nine months ended September 30, 2018.
- The company raised its quarterly dividend by 21.2% year-to-date, with the current annualized rate at $3.20 per share.
- Net revenues decreased slightly by 1.2% to $19,250 million for the nine months ended September 30, 2018, mainly due to lower volumes in the smokeable products segment.
- Operating companies income for the smokeable products segment remained stable, while the smokeless products segment saw a 15.3% increase in operating companies income.
- Altria repurchased $1,317 million of its common stock during the first nine months of 2018 under its share repurchase programs.
- The company's equity investment in AB InBev, though declining in fair value, was deemed temporarily impaired, with no impairment loss recognized.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Altria Group, Inc. kept $0.28.
- Revenue$6.84B100.0%
- Cost of revenue−$3.58B52.4%
- Gross profit$3.25B47.6%
- Operating costs−$698.0M10.2%
- Operating income$2.56B37.4%
- Interest, other & tax−$614.0M9.0%
- Net income$1.94B28.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed October 25, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $6.84B$6.73B | +1.6% |
| Cost of Revenue | $2.04B$1.94B | +5.0% |
| Gross Profit | $3.25B$3.17B | +2.6% |
| Operating Income | $2.56B$2.59B | −1.2% |
| Net Income | $1.94B$1.87B | +4.1% |
| EPS (Basic) | $1.03$0.97 | +6.2% |
| EPS (Diluted) | $1.03— | — |
| Shares Outstanding (Basic) | 1.88B1.92B | −1.7% |
05—Questions
Frequently Asked Questions
What is the overall financial health and performance of Altria based on this report?
Altria demonstrated a strong financial performance for the nine months ended September 30, 2018, with significant growth in net earnings and diluted EPS. This growth was primarily driven by the benefits of the Tax Cuts and Jobs Act, which lowered its corporate income tax rate, and increased earnings from its equity investment in AB InBev. The company also continued its shareholder return program by increasing dividends and executing share repurchases, indicating a positive financial outlook despite industry challenges.
How did Altria's different business segments perform?
The smokeable products segment experienced a slight decline in net revenues due to lower shipment volumes, though pricing strategies helped maintain operating income. The smokeless products segment showed robust growth, with increased net revenues and operating companies income, driven by higher pricing and cost management. The wine segment's net revenues saw a modest increase, but operating companies income decreased due to higher expenses.
What are the key risks and challenges facing Altria?
Altria faces significant risks from ongoing litigation, particularly tobacco-related lawsuits, which could materially impact its financial results. Additionally, increasing federal, state, and local excise taxes, stricter government regulations (including FDA actions on product standards and marketing), evolving consumer preferences, and intense competition within the tobacco industry are key challenges that could affect its business operations and profitability.
How is Altria managing its debt and liquidity?
Altria maintained access to financial resources and adequate liquidity. It has a $3.0 billion revolving credit agreement in place and no short-term borrowings at the end of the reporting period. The company's credit ratings remained stable. Altria anticipates increased liquidity from tax reform and plans strategic investments with these benefits, while continuing its dividend payments and share repurchases.
06—Continue