When it comes to making money, Altria
So it should be no surprise to loyal shareholders that Altria's fourth-quarter earnings followed the same savory recipe to deliver reported EPS growth of 25.7% and adjusted diluted EPS growth of 12.8%. Altria expects to grow adjusted EPS by 6% to 9% in 2011. Oh, and it's going to buy back another $1 billion in shares this year, too.
Altria's overall cigarette shipment volume was down by 7%. Who cares? Marlboro market share was up by 0.6 points on the quarter with the introduction of new Special Blend and Skyline Menthol products. Cigarette net revenue (excluding excise taxes) is down by 1.5%. So what? Altria still managed to grow operating income in a declining segment.
SABMiller (OTC: SBMRY.PK) continues to help Altria's earnings growth, delivering $191 million to this quarter's growth. Let's not underestimate SABMiller's contribution to the company's overall success as it contributed 13.6% toward Altria's earnings before tax. Altria's SABMiller earnings increased by 20.8% from last year as its overall investment increased by 7.8%, to $5.37 billion.
Cost reduction and its strategic integration of UST Inc. have been critical to Altria's success. Back in 2008, Altria touted its intensive cost focus as a key strategy to growing profit after spinning off Philip Morris International
Well Altria says it's delivered $300 million in UST integration cost savings as of the end of 2010. Not too bad, considering how many companies lose by combining. Altria cut cost of sales by 8% on the quarter to deliver gross profit growth of 9.9%, even though net revenue dropped by 1.4%.
Yes, even with the continuing menthol debate, 2011 does look to be an interesting year for tobacco stocks like Reynolds American
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Fool contributor Colleen Paulson does not hold positions in any of the stocks mentioned in this article. Philip Morris International is a Motley Fool Global Gains pick. The Fool owns shares of Altria and Philip Morris International. For more investing strategies, take a look at the Motley Fool's newsletters via a 30-day free trial. The Fool has a disclosure policy.