Over the years, Altria Group (NYSE:MO) has defied skeptics by consistently finding ways to grow its business even in the face of numerous threats. Investors now rely on Altria's ability to keep delivering steady growth regardless of the conditions the business faces, and coming into its third-quarter financial report on Thursday, Altria shareholders fully believe that the tobacco company will keep seeing its revenue and net income climb. Let's take an early look at what investors expect from Altria Group this quarter and whether we're likely to see any big surprises.

Image source: Altria Group.

Stats on Altria Group

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$5.11 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Data source: Yahoo! Finance.

Can Altria earnings keep rising?

Investors have gotten a little less certain in recent months about the prospects for Altria earnings, cutting their forecasts both for the third quarter and for the full 2016 year by $0.01 per share. Even though they've boosted their 2017 projections by the same $0.01, Altria shares have still almost 7% of their value since late July.

Altria's second-quarter results were mixed, showing that the tobacco company hasn't always been able to give investors everything they had hoped to see. Revenue actually dropped 1.4%, defying expectations for a slight increase. However, as it has done throughout much of its history, Altria used its pricing power to produce an impressive 14% rise in net income. Nevertheless, the fact that cigarette volume figures fell by 5% showed that even the world-renowned Marlboro brand has been vulnerable to adverse trends in the cigarette market. Success in the smokeless arena helped to offset some of the weakness in smokeable products, and Altria raised its earnings guidance for the full year slightly.

Going forward, though, investors are looking forward to the impact of Altria's having exchanged its interest in SABMiller for a 9.6% stake in Anheuser-Busch InBev (NYSE:BUD). Because the two companies report their financial results on a different schedule, Altria will see a one-quarter lag in incorporating Anheuser-Busch's results, and so investors shouldn't expect to see anything this quarter except for a big one-time gain related to the transaction. In addition to Altria's receiving a sizable stake in the newly combined entity, the 12-figure beer megamerger also resulted in Altria getting $5.3 billion in cash. The cigarette giant has already said that it will use some of the cash to boost its stock repurchase authorization, taking it from its previous $1 billion mark up to $3 billion. But that still leaves plenty of additional cash to consider other strategic moves, whether they be acquisitions, special dividends, or further buybacks.

How a rival's big M&A move could affect Altria

Of even more interest will be whether Altria responds to the recent announcement that British American Tobacco (NYSE:BTI) will seek to buy out archrival Reynolds American (NYSE:RAI) in a deal worth an estimated $46 billion. British American already held a massive 42% stake in Reynolds, and the merger would pay existing Reynolds shareholders $24.13 per share in cash along with 0.5502 shares of British American stock for every Reynolds share they own. Arguably, the deal seems to be more about helping British American work more effectively in its global business than about gaining greater entry to the U.S. tobacco market, but Altria should keep its eyes open nevertheless to see how the proposed deal pans out.

In the Altria earnings report, investors should watch out for issues directly affecting the tobacco giant's business strength, and any deviation from its typical growth trajectory would be noteworthy. At the same time, however, the most important question facing Altria investors is how the company will respond to all the shifting factors in the competitive landscape. If Altria can work to retain its edge in the industry, then even all the M&A activity in the space shouldn't pose a big threat to its dominance of the U.S. tobacco market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.