Altria Reaffirms Fiscal Outlook - Analyst Blog

Altria Group Inc. MO expects its business momentum to continue on the back of its premium brands — Marlboro and Camel. At its annual meeting, the company has reaffirmed its earnings guidance in the range of $2.52 to $2.59, up 6% to 9% from $2.38 in 2013. The Zacks Consensus Estimate is pegged at $2.56 for the fiscal 2014.

Over the long term, Altria expects to deliver 7% to 9% earnings per share growth on the strength of its diverse business model and solid performance by its core tobacco business. Altria plans to maintain a dividend payout ratio of approximately 80% of earnings.

The company recently posted first-quarter fiscal 2014 results with earnings of 57 cents that were up 5.6% from the prior-year quarter on the back of higher pricing and strong performance of the core tobacco business and leading premium brands. Earnings were in line with the Zacks Consensus Estimate.

Revenues, net of excise taxes, went up 0.9% year over year to $4.0 billion for the quarter due to revenue gains in the smokeless segment. All the business segments of the tobacco maker reported higher year-over-year operating income backed by better pricing and cost reduction initiatives. However, revenue missed the Zacks Consensus Estimate of $4.04 billion by 1%.

As a part of its long-term growth plan, Altria is investing heavily on the growing e-cigarette category. Recently, in Apr 2014, Altria's subsidiary Nu Mark LLC acquired the e-vapor business of Green Smoke Inc. and its affiliates. The acquisition is a strategic fit for Altria's e-cigarette business. Moreover, the expertise, experience, supply chain, product lines and customer service of Green Smoke are expected to strengthen Altria's presence in the category.

Altria carries a Zacks Rank #3 (Hold). A better-ranked stock in the tobacco sector is Philip Morris Inc. PM carrying a Zacks Rank #2 (Buy). Other stocks in the retail sector that are worth considering are Genesco Inc. GCO and Foot Locker, Inc. FL with the same Zacks Rank as Philip Morris.