Altria Group, Reynolds American Report Solid 2Q Earnings

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Altria Group, Reynolds American Report Solid 2Q Earnings

Altria Group, Inc. (NYSE:MO), the leading cigarette manufacturer in the United States, delivered an excellent earnings report during the second quarter. The company reported $1.23 billion net profit, a 179 percent increase compared with its $444 million earning during the same quarter the previous year.

The company exceeded the 57 cents per share average analyst estimated after reporting its current earnings at 59 cents per share. During the same period last year, Altria’s earnings per share was 21 cents.

Altria Group, Inc. reported that the company’s revenue increased by 14 percent to $4.6 billion excluding excise taxes. The company beats the $4.48 billion analysts’ expectations.

The cigarette maker also bought back its 2 million shares at around $32.37 per share. The total repurchase price was $66 million. The company previously announced its $1 billion shares buyback program. The company plans to complete its remaining $312 million in the program, by the end of this year.

Its cigarette volume remains flat at 36.2 billion cigarettes. After adjusting changes in wholesale trade inventories, its cigarette volume declined by 1.5 percent. The volume of its top selling brand Marlboro dropped by 0.8% and other premium products also decreased by 8.4 percent. Meanwhile, the volume of its discounted products rose by 24 percent and smokeless products by 7.6 percent.  The growth of its discounted and smokeless products, particularly Copenhagen and Skoal, compensated the weakness of its premium products.

The company also cited that its over-all cigarette market share rose by 0.8 percent to 50.1 percent. The market share of Marlboro in the United States climbed 0.3 percent to 42.9 percent.

Despite the challenges confronting the cigarette industry, including health concerns, tax hikes, smoking bans, and negative advertisements on smoking, the company managed to maintain a strong earnings performance by implementing different business strategies. The cigarette maker introduced and promoted new products with low prices. Altria also introduced different blends for Marlboro—the Marlboro Black (menthol and non-menthol flavor) to give emphasis to its “bold flavor” , and Marlboro Eighty-Threes,” described with “classic Marlboro flavor.”

In a statement, Marty Barrington, Chairman and Chief Executive Officer of Altria Group, said that its diverse business model drove the company’s outstanding second quarter financial performance. He said, “Altria delivered excellent financial results for the second quarter and first six months of 2012, reflecting the strength of our diverse business model. The brand-building activities of our tobacco companies contributed to adjusted operating companies income and margin growth in the smokeable and smokeless products segments. Exceptionally strong gains from our investment in SABMiller and our financial services business complemented these results.”

Meanwhile, Reynolds American, Inc. (NYSE:RAI) reported a 35 percent increase in second quarter earnings. The company’s profit rose from $327 million or 56 cents per share during the same period last year to the current $443 million or 78 cents per share. The company also repurchased its 6.1 million shares worth $250 million. Its stock value increase by 8.9 percent in 2012.

Daniel Delen, Chief Executive Officer of Reynolds American said he is satisfied with the company’s higher second quarter results, despite the weakening economy and strong competition.

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