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Smokeless Unit & Pricing to Boost Altria's (MO) Q2 Earnings

Zacks Equity Research

Altria Group, Inc. MO is slated to release second-quarter 2019 results on Jul 30, before the opening bell. The company’s earnings missed the Zacks Consensus Estimate by 2.2% in the last reported quarter. Prior to this, the bottom line had surpassed estimates for six straight quarters.

Let’s discuss how things are shaping up for the upcoming quarterly release.

Estimates Reveal Bright Prospects

The Zacks Consensus Estimate for earnings has improved by a penny in the past seven days and is currently stable at $1.10. The projected figure indicates 8.9% growth from the year-ago quarter’s level. The consensus mark for revenues is pegged at $5,047 million, suggesting a rise of 3.4% from the year-ago quarter’s level.

Altria Group, Inc. Price, Consensus and EPS Surprise

 

Altria Group, Inc. Price, Consensus and EPS Surprise

Altria Group, Inc. price-consensus-eps-surprise-chart | Altria Group, Inc. Quote

 

Smokeless Unit, Pricing & Savings: Key Catalysts

Altria’s smokeless unit is rapidly expanding on the back of consumers’ growing interests in low risk tobacco alternatives. Its flagship MarkTen and Green Smoke e-vapor products are performing strongly in this category. Also, the company’s partnership with JUUL — a renowned e-cigarettes player — has radically boosted its presence in the reduced risk tobacco products (RRPs) space. Moreover, the company’s partnership with Philip Morris PM, pertaining to the sale of IQOS in the United States, has been approved by the FDA. Altria has undertaken steps to expand into the booming cannabis industry, which is evident from the acquisition of stakes in Cronos Group CRON.  Well, these prudent partnerships are likely to boost the smokeless unit’s performance and support second-quarter results. Other tobacco players like British American Tobacco BTI have also undertaken endeavors to boost presence in the RRPs space.

Moving on, product pricing is expected to be a vital revenue driver during the quarter. Markedly, price hikes enable Altria to cushion impacts from high taxes levied on tobacco products.  

Also, the company is progressing well its cost-reduction program, which is aimed to rake in annualized cost savings of nearly $575 million by the end of the year 2019. The program also focuses on reducing workforce and third-party spending. These initiatives are likely to make a positive impact on the forthcoming results.

On the flip side, matters have been gloomy in the company’s cigarette category, thanks to declining sales volumes. Cigarette sales are being impaired by fading consumer enthusiasm and regulatory hurdles. Nevertheless, we expect Altria to tide over such hurdles on the back of gains from the smokeless unit and efficient product pricing.

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 carries a Zacks Rank #3 and has an Earnings ESP of +0.91%, which 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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