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Will Pricing & RRPs Aid Altria's (MO) Q1 Earnings Growth?

Zacks Equity Research

Altria Group, Inc. MO is slated to release first-quarter 2019 results on Apr 25, before the opening bell. The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average being 1.3%. In fact, the company’s bottom-line performance has been impressive for almost a year now. Let’s delve into how things are shaping up for the upcoming quarterly release.

Smokeless Products Much in Demand

Reduced risk tobacco products (RRPs) are gaining traction among consumers, owing to rising health consciousness. The recent completion of the company’s partnership with JUUL, a renowned e-cigarettes player, is expected to influence first-quarter results. Moreover, the well-performing MarkTen and Green Smoke e-vapor products are likely to have an impact.

Pricing & Savings Efforts

Product pricing is expected to have been a vital revenue driver for the quarter. Last December, the company announced a cost-reduction program with an aim to rake in annualized cost savings of nearly $575 million by 2019-end. The program is also aimed at bringing down workforce and third-party spending. These initiatives are likely to show on the impending results.

Altria Group, Inc. Price, Consensus and EPS Surprise

 

Altria Group, Inc. Price, Consensus and EPS Surprise | Altria Group, Inc. Quote

 

Will Receding Cigarette Sales Char Performance?

Matters are gloomy in the cigarette category, thanks to declining sales volumes. Cigarette sales are being impaired by fading consumer enthusiasm and regulatory hurdles. Apart from Altria, declining cigarette sales volumes are hurting other tobacco players like Philip Morris PM, Vector Group VGR and British American Tobacco BTI.

With increasing vigilance on tobacco products, it is hard for Altria to escape the impacts of deteriorating sales. Although RRPs are gaining traction, they are yet to offset the decline in cigarette volumes. Management expects domestic cigarette industry volume to decline in the range of 3.5-5% in 2019. This factor along with concerns related to soft cigarette sales mars expectations for the upcoming quarterly results. Markedly, the Zacks Consensus Estimate for first-quarter revenues in the smokeable unit is pegged at $5,237 million, depicting a decline of roughly 3.3% from the year-ago reported figure.

Further, the consensus mark for first-quarter net revenues is pegged at $4,528 million, suggesting a decline of nearly 3% from the year-ago reported figure. The Zacks Consensus Estimate for earnings has been stable in the past 30 thirty days at 92 cents per share. The estimate reflects a decline of 3.2% from 95 cents delivered in the year-ago quarter.

Zacks Model

Our proven model shows that Altria is likely to beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.

Altria’s Zacks Rank #3 combined with the Earnings ESP of +0.31% makes us reasonably confident about an earnings beat. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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Altria Group, Inc. (MO) : Free Stock Analysis Report
 
Philip Morris International Inc. (PM) : Free Stock Analysis Report
 
British American Tobacco p.l.c. (BTI) : Free Stock Analysis Report
 
Vector Group Ltd. (VGR) : Free Stock Analysis Report
 
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