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Altria Posts a Strong Third Quarter

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US tobacco giant Altria (click ticker for report: ) reported strong third quarter results Thursday morning. Revenue grew 2.2% year-over-year to $6.2 billion, which was considerably stronger than consensus expectations. When adjusted for one-time items, earnings increased 3.2% to $0.58 per share, roughly in-line with consensus estimates. The firm took a hefty charge of $874 million to account for early debt extinguishment, and it subsequently took advantage of cheap interest rates, issuing $1.9 billion worth of 2.85% unsecured notes due in 2022 and $900 million in 4.25% unsecured notes due in 2042. We think the new capital can be used to repurchase shares, as the company authorized an additional $500 million in its share repurchase program. Even though we believe … Read more

Altria Posts Decent Fourth-Quarter Results; Dividend Yield Still Attractive

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Altria (MO) posted fourth-quarter results Friday that showed strength in its smokeless product volume and higher pricing in its cigarette segment. We continue to like the firm’s exceptional dividend yield at today’s prices and think Altria remains a key component of both our Best Ideas and Dividend Growth portfolios. Our fair value estimate for Altria remains unchanged. Altria’s total fourth-quarter net revenues advanced 3.4% due to increased performance across all of its reportable segments. The company’s cigarette segment’s net revenue advanced about 3% thanks to higher list prices, offset in part by lower volume. Revenue in the company’s smokeless products’ segment increased 6.6% thanks to both higher volume and pricing. Total combined shipment volume for its Copenhagen and Skoal products … Read more

Altria Reports Second-Quarter Results

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Altria (MO) reported its second-quarter results Wednesday. Adjusted earnings advanced 6% from the prior-year quarter and are now on pace to increase 5.4% for the full year (its pace through the first half). Income from the firm’s cigarettes segment increased nearly 3% on an adjusted basis, with Marlboro delivering sequential retail share growth of 0.4 percentage points. Both Copenhagen and Skoal also showed improving market share in the period. Altria is not immune to economic malaise, as it indicated that the business environment for 2011 will likely remain challenging, as adult consumers face personal financial pressure and high unemployment. However, the firm reiterated its full-year guidance for adjusted earnings in the range of $2.01 and $2.07, which reflects growth of … Read more

Altria’s Dividend Yield is Quite Tempting

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Some readers may be surprised that (Altria) is a top performer for investors in the face of the onslaught of government restrictions and legal actions that have cost the firm tens of billions of dollars and threaten the cigarette manufacturer with bankruptcy. But in the capital markets, bad news for the firm often is transformed into good news for investors. Many shun the stock in the company and fear that its legal liability for producing a dangerous product–cigarettes–will eventually crush the firm. This aversion to the firm pushes down the price of (Altria’s) shares and raises the return to investors who stick with the stock. As long as the firm survives and continues to be very profitable, paying out a … Read more

Lorillard’s Valuation Leaves Something to Be Desired

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/276520-lorillards-valuation-leaves-something-to-be-desired  The FDA recently ruled that beginning in the fall of next year, all cigarette packaging and advertisements in the U.S. must reveal prominent and perhaps gory health warning labels. These new and larger cigarette warnings, which include an image of a man smoking through a hole in his throat and an image of a parent holding a baby as smoke drifts toward them, represent a huge step by the current administration to curb new smokers from picking up the habit, while encouraging others to quit. But should investors of Lorillard (LO), Altria Group (MO) and Reynolds American (RAI) be concerned? Regulation has long been a part of the tobacco industry and while … Read more

There Is Milk At The Store

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This article first appeared in the September edition of the High Yield Dividend Newsletter. For more information about this publication, please see here. “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” — Winston Churchill By Brian Nelson, CFA Very few of us could have imagined that we’d witness the bull market that began on that fateful day in March 2009 that might very well mark a generational low. In 2009, major investment banks around the globe were struggling to survive, and the fallout in the mortgage markets left the banks holding paper that nobody wanted to own, let alone buy. The global financial system … Read more

The Best Years Are Ahead

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By Brian Nelson, CFA — The wind is at our backs. — The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. — The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets … Read more