Altria Group Inc., owner of the biggest U.S. cigarette maker, Philip Morris USA, reports its first-quarter results before the stock market opens Wednesday.
WHAT TO WATCH FOR: Whether the top-selling Marlboro brand continues to gain more of the cigarette market. Marlboro has gained market share as the number of cigarettes sold has declined industrywide in the face of recent tax increases, smoking bans and rising health concerns and social stigma.
Richmond-based Altria has introduced several new products the Marlboro brand -- often with lower promotional pricing -- including special blends of both menthol and nonmenthol cigarettes to help keep the brand growing and attract its competitor's smokers.
The company said Marlboro accounted for 42.3 percent of cigarettes sold in the U.S. in the fourth quarter, although it sold 5.7 percent fewer cigarettes in the period. Its other brands, including Virginia Slims, Parliament and Basic, saw declines in market share and volumes.
Altria faces competition from other companies' less expensive brands -- like Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc. Even so, Altria has raised prices on some brands and maintained its profit per pack.
Analysts also will look to see how Altria's Black & Mild cigars and Copenhagen and Skoal smokeless tobacco products, as well as Marlboro Snus, perform. Its smokeless products have seen gains in recent quarters. Altria's cigar business saw revenues fall last quarter as it spent more money promoting the brand, but its volumes remained unchanged.
Altria and other tobacco companies are looking to cigarette alternatives -- such as cigars, snuff and chewing tobacco -- for growth.
The company also has planned to conduct a $1 billion share buyback program in 2011 and continues to work on cutting general and manufacturing costs by $1.5 billion compared with 2006.
WHY IT MATTERS: Increased spending on premium brands like Marlboro could signal consumers are adjusting to higher prices on cigarettes following a federal and state tax increases. Consumer spending continues to be critical to a strong rebound from the worst economic downturn since the Great Depression.
WHAT'S EXPECTED: Analysts expect Altria to earn 44 cents per share on sales of $3.9 billion, according to FactSet. Analysts typically exclude one-time items from their earnings estimates.
LAST YEAR'S QUARTER: Altria reported net income of 42 cents per share, excluding one-time items. Its revenue was $3.95 billion, excluding excise taxes.
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