Altria Earnings Call Notes

6 Aug 11:09am
Posted by ToddSullivan
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Catching up on the notables from Altria's (MO) recent earnings call.

- Repurchased 53.5 million shares during the quarter at an average price per share of $21.81. Additionally, Altria declared a quarterly dividend of $0.29 per common share paid to stockholders of records as of June 13, 2008. This equates to approximately $600 million in dividend payments. Combined, the stock buyback and dividends totaled approximately $1.8 billion. This represents over 4% of Altria's June 30th market capitalization.

- John Middleton (cigar) delivered $50 million in operating company's income and grew its total cigar shipment volume by 11% to 355 million units in the second quarter. John Middleton is capitalizing on PM USA's sales and distribution infrastructure and expertise to help grow Black & Mild.

The call was a bit disappointing as a number if the questions focused around the FDA bill (below) and even though management said at least seven times I counted they would not comment, the questions kept coming. Smokeless was what I wanted to hear about and neither the prepared remarks nor any of the questions really broached the subject in any type of detail.

With smoking rates dropping about 3% a year and both smokeless and cigar usage climbing, wouldn't you think the "analysts" would have placed a bit more focus on Altria's entrance into the area? Frustrating....

Here is the sole exchange on it:
David Adelman - Morgan Stanley
"Okay and then secondly Dave I am curious about your reactions to the observation particularly given some increased pace of movement within tobacco but outside the cigarette category that you are not moving more aggressively with respect to moist smokeless tobacco and particular and perhaps Snus the, the test market I think in Atlanta of moist smokeless started last October, its almost the year ago its really has an expanded materially and I just wonder the outside perception is there is a lack of urgency on those types of efforts because you are not moving. It would appear with great speed. So I am just curious about your reaction that observation."

David R. Beran - Executive Vice President and Chief Financial Officer
"Yes, and out of it not characterize it as a lack of urgency, I would characterize it as and we want to make sure that we do this in a financially disciplined way, and when I say financially disciplined that we go out. We have tested all elements of the overall value equation behind both snus and with snuff and we got it completely right, then we won't incorporate that into our plans. And right now, both of those initiatives are investment spent for us and our goal is to take it from investment spend to being, making a profit. But right we are in... these test markets are what I call burning laboratories and make sure we get it right."

In other news, the much talked about Tobacco / FDA legislation passed the house but faces serious hurdles. Read more about the FDA and Altria here.


Disclosure ("none" means no position):Long MO

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About

ToddSullivan

A Massachusetts based value investor, I look for companies whose current valuation is at a discount to their true value. When I purchase a stock, my typical holding period is several years. I consider buying a stock purchasing a piece of a business. I am confident once I make a decision to buy that eventually the market as a whole will recognize the true value of the business and value it accordingly. It may take 1 month, 6 months or a year, but if I buy it at enough of a discount to its true value my results will be (and have been) superior to the market as a whole. Of all the disparate investing disciplines, value investing has stood the test of time. The great investors of have all been value investors. Warren Buffett, Ben Graham, Bill Ruane (Sequoia Fund), Bill Miller and Wally Weitz, all have consistently outperformed the market for decades by using various forms of value investing. Currently I am a contributing writer to Seeking Alpha, Vinvesting.com, The Stock Masters and Value Investing News. Posts have been reprinted in The Wall St. Journal, Yahoo Finance, Google Alerts, Google Finance, TheStreet.com. 24/7 Wall St. and Topix.net.

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