What to Expect from Altria Earnings

Altria Group Inc. (MO) is set to report its second-quarter financial results Wednesday before the markets open. The consensus estimates from Thomson Reuters call for $0.71 in earnings per share (EPS) on $4.75 billion in revenue. The same period from the previous year had $0.65 in EPS on $4.57 billion in revenue.

This company manages to just keep chugging along. Despite lower case volumes and despite the trends against smoking, price hikes and cost containment rule the roost. Dividends keep growing year after year, and this company has virtually no currency headwinds after the split with Philip Morris International (PM). Altria also keeps issuing guidance that would support higher payouts ahead.

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The current trend of e-cigs is even counterintuitively keeping smokers still buying packs of real cigarettes occasionally, at least a lot more than if they were to just switch to nicotine gum — or just quit nicotine altogether.

Another unexpected boost may actually be the merger for the new Reynolds American Inc. (RAI) after the Lorillard deal. Sure, it is more intense competition. The other side of the coin is that the merger takes Big Tobacco in the United States closer to a duopoly, outside of selective other niche brands and imports. Investors love pricing power and Reynolds and Altria have it.

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Ahead of the earnings report a couple analysts weighed in:

• Goldman Sachs initiated coverage with an Outperform rating.

• Morgan Stanley has an Equal Weight rating and raised its price target to $51 from $48.

Earlier in May, PMUSA announced a $3.50/1,000 sticks list price for Marlboro, L&M and its other cigarette brands. Further, PMUSA announced a $0.07 per tin increase for Marlboro Snus. This price increase follows a list increase of a similar amount in November 2014 and represents about a +1.6% to +1.8% increase across its cigarette portfolio. Merrill Lynch believes there will be another increase of similar size in November 2015.

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Shares of Altria were up 1.5% at $54.77 on Tuesday afternoon. The stock has a consensus analyst price target of $57.67 and a 52-week trading range of $40.26 to $56.70.

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