For the full-year 2003, earnings declined from $5.21 in 2002 to $4.52. That sure sounds bad, but remember, 2002 results included a $0.81 per-share gain from the sale of Miller Brewing. Back that out, and 2003 was another step forward.
The highlight is tobacco -- especially domestic sales. Premium leader Marlboro's market share jumped from 37.4% last year to 38.5%. Overall, Phillip Morris, which bumped its total share from 48.1% to 49.1%, now accounts for nearly one of every two cigarettes sold in the U.S. That's a lot of smokes and, with premium-priced Marlboro out front, a lot of cash.
International sales inched a meager 1.6% higher, but in this case, the year-ago quarter benefited from a strong shipment to Japan and other markets hurt by the dock strikes in the prior quarter. Either way, operating income increased a hefty 8.2% for the latest quarter.
One might make the case that Phillip Morris will continue to grow its market share in the fashion of global beer powerhouse Budweiser
So, which is it? When you get right down to it, the new R.J. Reynolds may control 30% of the tobacco market, but it lacks a dominant brand like Marlboro. Moreover, R.J. Reynolds already is battling declining sales, and both it and British American Tobacco are burdened with restructuring charges.
Granted, with $19 billion in long-term debt, Altria has a rarified 95% debt-to-equity ratio. Granted again, investors must weigh handsome operating margins (approaching 16%) against legal risks (a whole topic unto itself), not to mention the fact that, including dividends, the stock has increased 46% since year-end 2002.
Still, if you ask me, for investors looking for a piece of the highly profitable tobacco business, Altria is it. At a relatively meager 12 times earnings, and yielding 4.9%, the stock still looks reasonably priced -- especially given that the company is increasing market share and profitability.
When it comes to tobacco, Altria blazes the competition.
W.D. Crotty is a former Brown & Williamson Tobacco employee and knows the tobacco business. Tobacco stocks are great for yield investors. If dividend -paying stocks interest you, consider a 30-day free trial to the Motley Fool Income Investor .