Altria Group Inc., whose products range from Marlboro cigarettes to Kraft macaroni and cheese, on Tuesday said second-quarter profit rose 7.8 percent, boosted by the weaker dollar and a lower tax rate.
Altria, the parent of tobacco companies Philip Morris USA and Philip Morris International, as well as Kraft Foods Inc., earned $2.63 billion, or $1.27 per share, in the quarter, compared with $2.44 billion, or $1.20 per share, a year earlier.
Analysts expected New York-based Altria to earn $1.24 to $1.31 per share, with a mean target of $1.28, according to Reuters Estimates. An Altria spokesman said the comparison to the reported results might not be exact because analysts made varying assumptions for one-time items.
"When you strip them all away, I would say results were just marginally, marginally ahead of expectations on an underlying basis," said David Adelman, analyst at Morgan Stanley, who rates the stock "overweight."
The 2004 quarter included 13 cents per share in charges related to restructuring at Kraft and a cigarette smuggling agreement with the European Commission. It also included a 15 cents per share benefit from a lower effective tax rate and 5 cents per share due to the impact of the weak dollar.
Revenue rose 10.5 percent to $23.01 billion from $20.83 billion.
Philip Morris USA shipped 48.6 billion cigarettes in the quarter, up 0.9 percent from a year earlier. Marlboro, the world's top brand, grew its U.S. market share 1.8 percentage points to 39.6 percent.
Philip Morris International shipped 192.7 billion cigarettes, up 2.8 percent from a year earlier. Market share gains in several countries helped offset pressure in Germany and Italy.
Altria reiterated its forecast for 2004 earnings of $4.50 to $4.60 per share.
The forecast includes the special items such as charges for the restructuring of Kraft Foods and for the cigarette smuggling agreement with the European Commission, and the impact of an expected lower tax rate.
Goldman Sachs analyst Judy Hong, who has an "in-line" rating on Altria, said "operating outlook appears lower than expected, mostly due to a softer outlook" at Kraft.
On Monday, Kraft Foods reported its second-quarter profit fell 26 percent to $698 million, or 41 cents a share, as costs for dairy products and marketing rose. Northfield, Illinois-based Kraft also cut its full-year profit forecast.
Altria, as expected, took a pretax charge of $250 million in the second quarter for its initial payment to the European Commission. In all, Altria agreed to pay $1.25 billion over 12 years to fight contraband cigarettes and end legal disputes with the European Union over smuggling charges.
