Better economy spurs Altria cigarette sales
By MICHELLE CHAPMAN, Associated Press
Jul 29, 2015 9:29 AM CDT
In this photo taken July 17, 2015, store manager Stephanie Hunt poses for photos with a pack of Marlboro cigarettes, an Altria brand, at a Smoker Friendly shop in Pittsburgh. Altria reports quarterly financial results on Wednesday, July 29, 2015. (AP Photo/Gene J. Puskar)   (Associated Press)

NEW YORK (AP) — A better economy is prompting smokers to buy more cigarettes, even as prices climb. This helped Marlboro maker Altria in its second quarter.

The uptick in cigarettes sold is unusual at a time when tobacco companies have routinely seen declines, as people smoke fewer cigarettes because of tax increases, smoking bans and increasing social stigma. Camel cigarette maker Reynolds American said Tuesday that it also sold more cigarettes in the quarter.

Altria said part of the increase resulted from retailers' inventory movements, which often come ahead of a price increase. But it said volume rose 1 percent in the quarter even adjusting for that factor.

Christopher Growe of Stifel Nicolaus said in a client note this week that improving economic conditions — particularly for adult tobacco consumers — is supporting growth of the category overall.

One component that's likely playing a role is the job market. Employers have steadily added jobs since the beginning of 2014, creating an average of 242,556 jobs each month and the unemployment rate has fallen to 5.3 percent from 6.7 percent during that time.

Home prices in the U.S. are also climbing, with a report on Tuesday indicating that limited supply and accelerating home sales are pushing prices up. And while gasoline prices may be on the rise this year, they are still below year-ago prices.

Altria Chairman and CEO Martin Barrington said during a conference call that the company knows that adult tobacco consumers started to feel better during the second half of 2014, when gasoline prices began to drop sharply.

While Altria anticipates gasoline prices in the latter part of 2015 may top the prior-year period's pricing, Barrington said that's not the only thing people are focusing on. The executive said that the adult tobacco consumer is stronger in 2015 thanks to several economic factors, such as escalating home prices, lower unemployment rates and healthy consumer confidence.

Altria reported that Marlboro shipment volume rose 3 percent in the second quarter, while discount cigarette shipment volume increased 8.9 percent.

Total cigarette shipment volume climbed 3.1 percent. This is the second consecutive quarter that Altria has reported a volume increase. It experienced volume declines in the three quarters before that.

Altria also raised the price of a pack of Marlboros. The net price per pack was $6.08 in the second quarter. That's 13 cents higher than a year earlier.

For the period ended June 30, Altria Group Inc. earned $1.45 billion, or 74 cents per share. A year earlier it earned $1.26 billion, or 64 cents per share.

The results exceeded Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of 72 cents per share.

Revenue, excluding excise taxes, totaled $4.88 billion.

Altria, which also owns a wine business and has a voting stake in brewer SABMiller, boosted its full-year adjusted profit outlook to a range of $2.76 to $2.81 per share. Its prior guidance was for $2.75 to $2.80 per share.

Analysts surveyed by FactSet expect $2.81 per share.

The Richmond, Virginia-based company also said Wednesday that it plans to buy back $1 billion shares of its common stock by the end of next year.

Its stock shed 45 cents to $54.80 in morning trading. Its shares have risen almost 32 percent over the past year.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on MO at http://www.zacks.com/ap/MO

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