Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Altria Headed South?

Poor Altria (NYSE: MO  ) . Now that Philip Morris International (NYSE: PM  ) has been spun off, the former cigarette champ is no longer the belle of the smoker's ball.

Altria (a.k.a. Philip Morris USA) has lost its international presence, leaving only the dying U.S. smoking market to support the company. It's also moved from its swanky New York digs to humbler new headquarters in Richmond, Va.

The growing pains certainly showed in Altria's first-quarter earnings results, which were released yesterday. Net revenue inched up just 2.8% from last year, while reported earnings per share dropped by 12.1%. Even after adjusting for the spinoff charges and costs associated with relocating, the company's 12.1% increase in earnings per share from continuing operations paled in comparison to half-brother PMI's recent 29% earnings jump.

Now that its PMI spinoff is complete, the reorganized Altria forecasts that its new Southern headquarters will improve its cost structure. Overall, Philip Morris USA cigarette volume dropped by 1.2% year over year, with a 0.5% increase in overall market share. Marlboro has maintained its market-leader status, with a 0.7% increase in market share for the quarter. That brought its Marlboro market share to 41.5%, and overall Philip Morris USA market share to 50.9%.

The company is also looking to expand its U.S. presence and take advantage of Marlboro brand strength, testing its new "Marlboro Snus" product in Dallas. Marlboro Snus is described as "a spit-free, smokeless tobacco pouch designed especially for adult smokers." Not quite appealing to me, but it shows the initiatives the company is taking to roll out new products that further capitalize on its strong Marlboro brand.

Imagine if other big global names like Coca-Cola (NYSE: KO  ) or Anheuser-Busch (NYSE: BUD  ) decided to split their domestic and international operations. For many companies today, international expansion generates the most earnings growth. Most U.S.-based companies would see their results go up in a puff of smoke if they decided to establish a similar business model.

Of course, lawsuits are the biggest ongoing risk for Altria, a concern that triggered the spinoff of PMI in the first place. Even with a revised cost structure, Altria's lack of ongoing growth will continue to hurt results. Its headquarters may have moved south, but the company will have to work hard to keep future earnings from following suit.

For related Foolishness:

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 630396, ~/Articles/ArticleHandler.aspx, 10/21/2016 9:26:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 12 hours ago Sponsored by:
DOW 18,162.35 -40.27 0.00%
S&P 500 2,141.34 -2.95 0.00%
NASD 5,241.83 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 4:00 PM
MO $61.85 Down +0.00 +0.00%
Altria Group CAPS Rating: ****
BUD $127.44 Down +0.00 +0.00%
Anheuser-Busch InB… CAPS Rating: *****
KO $41.93 Down +0.00 +0.00%
Coca-Cola CAPS Rating: ****