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Earnings Preview: Altria Group Inc.

Michael Felberbaum, AP Tobacco Writer

RICHMOND, Va. (AP) -- Altria Group Inc., parent of the biggest U.S. cigarette maker, Philip Morris USA, should give investors a sense of whether its top-selling Marlboro brand can keep its command of the market when it releases its third-quarter financial results before the stock market opens Thursday.

WHAT TO WATCH FOR: The premium Marlboro brand has been under pressure from competitors and lower-priced cigarette brands as consumers face economic stress and high unemployment.

The economic challenges are in addition to the tax hikes, smoking bans, health concerns and social stigma that have made the cigarette business tougher.

Meanwhile, the industry continues to raise prices despite falling cigarette volumes.

The Marlboro brand sold for an average of $5.78 per pack during the second quarter, compared with an average of $4.30 per pack for the cheapest brand.

The company has introduced several new products with the Marlboro brand, often with lower promotional pricing. They include special blends of both menthol and non-menthol cigarettes to try to keep the brand growing and to lure smokers away from its competitors. It has said it has a pipeline of innovative products to supplement the Marlboro brand in the future.

Marlboro volumes fell more than 7 percent to 29.1 billion cigarettes in the second quarter but its retail share of the U.S. market was flat at 43.7 percent.

Altria's overall cigarette volumes fell nearly 7 percent to 33.8 billion cigarettes during the quarter. Adjusting for trade inventory changes, Altria says its cigarette volumes were down 3.5 percent during the quarter, compared with a total industry decline of 4 percent. Volume for its other premium brands fell by nearly 11 percent, and volumes for discount cigarette brands like L&M increased nearly 4 percent.

Its share of the U.S. retail market rose 0.3 percentage points to 50.7 percent in the second quarter.

The company continues to face pressure from less-expensive brands such as Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc. Maverick's volume fell 4 percent during the same period.

Altria and other tobacco companies also are looking for growth from cigarette alternatives such as cigars, snuff and chewing tobacco. So analysts will want to see how Altria's Black & Mild cigars and Copenhagen and Skoal smokeless tobacco products. The company also rolled out its first electronic cigarette under the MarkTen brand in Indiana in August.

Altria also owns a wine business, holds a voting stake in brewer SABMiller, and has a financial services division.

WHY IT MATTERS: Increased spending on premium brands like Marlboro could signal consumers are adjusting to paying more for cigarettes following federal and state tax increases.

WHAT'S EXPECTED: Analysts expect Altria to earn 64 cents per share on revenue of $4.53 billion, according to FactSet.

LAST YEAR'S QUARTER: Altria reported adjusted net income of 58 cents per share on revenue of $4.46 billion. Figures for both periods exclude excise taxes the company passes through to the government.


Michael Felberbaum can be reached at https://www.twitter.com/MLFelberbaum .