Altria Exhales Growth

As earnings releases heat up, we hear more and more about struggling revenue growth and profit declines in today's challenging economic climate. One company in a particularly tough situation is Altria (NYSE: MO  ) , which recently spun off Philip Morris International (NYSE: PM  ) and all of its great global growth opportunities. However, rather than whining about the lack of growth in the lagging domestic tobacco industry, Altria continues to focus on profitability and market-share growth to drive EPS increases.

In that light, Altria posted respectable second-quarter earnings, considering the company's recent changes in structure. Revenue only increased by 4%, as the core Philip Morris USA cigarette volume dropped by 4.5%. But even with the overall volume decline, Altria's market share for cigarettes increased by 50 basis points, driven by an 80-basis-point increase for the company's Marlboro brand. And despite a 7.3% increase in cost of goods sold, adjusted earnings per share increased by 12.2%. Altria even bought back $1.2 billion worth of shares during the second quarter.

It's clear that Altria is watching costs to maintain profit growth, with general corporate expenses decreasing by 37% for the quarter after the company moved its headquarters to Richmond, Va. In comparison, competitor Reynolds American (NYSE: RAI) reported improved results yesterday, after an EPS decline  last quarter. Even better, Reynolds management cited improved market conditions; that should also bode well for Altria, given the lengthy slump in the overall U.S. market for cigarettes.

Altria has established a strong brand name for a product in which brand preference really matters. And even in the midst of the unfavorable change the company has gone through, it has maintained focus on the bottom line, delivering growth to investors despite the waning domestic environment.

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Fool contributor Colleen Paulson does not hold positions in any of the stocks mentioned above. The Fool's disclosure policy never spins out of control.


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11/26/2014 4:00 PM
MO $49.72 Up +0.26 +0.53%
Altria Group, Inc. CAPS Rating: ****
RAI $65.20 Up +0.25 +0.38%
Reynolds American,… CAPS Rating: ****

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