Altria Missed Revenue Estimates in Fiscal 4Q15
Altria Missed the 4Q15 Mark: Strong Segments Provided Support
Altria missed revenue after beating estimates for five quarters
As we’ve already seen, Altria Group’s (MO) net revenue increased 2.5% to $4.7 billion in fiscal 4Q15 compared to $4.6 billion in fiscal 4Q14. The increase was primarily due to an increase in revenue for all Altria’s business segments, including smokable products, smokeless products, and wine.
However, in fiscal 4Q15, Altria missed revenue estimates after beating them for five consecutive quarters. Consensus estimates had projected a revenue of $4.8 billion.
Rise in revenue vs. peers
The company’s full year 2015 net revenues increased 5.1% to $18.9 billion. The increase in net revenue was primarily due to higher pricing, partially offset by lower shipment volume.
Other companies such as British American Tobacco (BTI), Philip Morris International (PM), and Reynolds American (RAI) are yet to release their fiscal 4Q15 results. However, Reynolds American’s (RAI) revenue increased 41.1% to $3.2 billion in fiscal 3Q15. The increase was due to RAI’s domestic cigarette volume increase of 29.5% in 3Q15, benefiting from the addition of the Newport brand.
Anheuser-Busch InBev–SABMiller transaction strengthens portfolio
In Altria’s fiscal 4Q15 earnings release, Martin J. Barrington, the company’s CEO (chief executive officer), mentioned that the Anheuser-Busch InBev (BUD) (AHBIF) (ABI.BR)–SABMiller (SBMRY) (SAB.L) transaction would offer a significant premium on its beer investment and would offer continued participation in the global brewing profit pool. Altria is SABMiller’s largest shareholder, with a ~26.6% stake.
Altria expects to receive an approximate 10.5% equity interest in the new combined company and approximately $2.5 billion in pretax cash, each subject to proration. In addition, the announced transaction will provide Altria with two seats on the new company’s board of directors and continued use of equity accounting for the beer asset’s contribution to Altria’s earnings. The transaction structure might also provide tax efficiency to Altria. This will help contribute long-term earnings growth and strengthen its top line.
Altria constitutes 1.5% of the portfolio holdings in the iShares Select Dividend ETF (DVY).
In the other parts of this series, we’ll focus on Altria’s revenue and cost drivers for its three reportable segments.
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