- The Washington Times - Monday, April 20, 2009

RICHMOND, VA. (AP) - Altria Group Inc. reports first-quarter results on Wednesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The owner of the nation’s biggest cigarette maker, Philip Morris USA, said in February that its adjusted profit will grow 3 percent to 6 percent in 2009. The Richmond-based company expected earnings from continuing operations to grow to a range of $1.70 to $1.75.

The company, which sells Marlboro cigarettes and Black & Mild cigars, closed on its acquisition of UST Inc. in January, giving it the Copenhagen and Skoal smokeless tobacco brands. It is separate from Philip Morris International _ which sells Marlboros, L&M;, Parliament and Virginia Slims outside the U.S.

It said that its guidance takes into account higher excise taxes, cost cuts, higher pension expenses and no share buybacks.

In January, Altria posted net income of $679 million for the quarter that ended Dec. 31. That compares with $2.19 billion a year earlier, when its operations still included Philip Morris International.

BY THE NUMBERS: Analysts surveyed by Thomson Financial, on average, expect Altria to post a profit of 39 cents per share for the first quarter. Revenue is projected at $4.0 billion.

ANALYST TAKE: Analysts expect earnings for the industry overall to be down in the first quarter due to higher prices implemented to offset the federal tobacco tax increase.

Citi Investment Research analyst Adam Spielman also said tobacco wholesalers and retailers tried to limit their inventory temporarily in preparation for paying a tax April 1 on what they owned that day. This “floor” tax of 62 cents per pack of cigarettes compounded the pain from higher prices that cigarette manufacturers are charging.

Spielman expects the temporarily lower inventory to cause first-quarter volumes to fall as much as 15 percent. He lowered his expectations for Altria, saying the destocking may limit gains to the stock price in the near term.

WHAT’S AHEAD: The entire industry continues to await word on legislation to give the Food and Drug Administration the authority to regulate tobacco. The House already has approved it and the Senate could take up a version of the bill this month.

Some believe the bill’s passage would primarily help Philip Morris USA, which would cement its position as market leader if regulation tightens on marketing and new product introductions.

Wall Street also will be looking at how the impact of the single largest federal tobacco tax increase, which hit April 1. Analysts believe there will be a short-term impact in earnings for the first half of the year.

STOCK PERFORMANCE: During the quarter ended March 31, shares of Altria rose about 5.4 percent to end the period at $16.02. Over the last 52 weeks, the stock has traded between $14.34 and $23.02.

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