Altria Profit Rises 9.4% as Cheap Gas Boosts Cigarette Sales

  • Sales increase to $4.98 billion, topping analysts' estimates
  • Cigarette sales volumes rise 0.1%, led by discount brands

Altria Group Inc., the largest seller of tobacco in the U.S., posted a 9.4 percent gain in third-quarter profit as lower gas prices gave smokers more money to spend on cigarettes.

Net income rose to $1.53 billion, or 78 cents a share, from $1.4 billion, or 71 cents, a year earlier, Richmond, Virginia-based Altria said Thursday in a statement. Excluding some items, profit was 75 cents a share, matching analysts’ average estimate.

Cheaper gas is helping the Marlboro maker’s sales as smokers buy more cigarettes and trade up to premium brands. Revenue net of excise taxes rose 4.7 percent to $4.98 billion in the quarter, topping analysts’ projections. Altria also has benefited from higher prices for its products.

“There’s a lot of optimism right now because of low oil prices and low gas prices, and that’s done pretty well for the cigarette tobacco consumer,” said Dan Wood, an analyst at Morningstar Inc.  

Altria rose 0.1 percent to $61.53, an all-time high, at the close in New York. The stock has gained 25 percent this year, topping the 1.5 percent increase for the Standard & Poor’s 500 Index.

Cigarette Gains

Sales of Altria’s smokeable products, which also include Virginia Slims, Parliament and L&M cigarettes, rose 4.7 percent to $4.36 billion, net of excise taxes, helped by a 0.1 percent increase in shipment volume. Altria’s discount brands posted the biggest volume increase, at 10 percent, while Marlboro fell 0.7 percent and its other premium brands slid 4.3 percent.

"They have been getting a lot of traction with L&M in the discount segment, which is not necessarily a bad thing because it’s a segment where they’ve not traditionally been that strong," said Owen Bennett, an analyst at Nomura International Plc. "That’s starting to really gain some acceptance now with consumers."

Altria’s smokeless products, such as Skoal and Copenhagen chewing tobacco, posted a 4.2 percent sales gain on a 0.9 percent volume increase.

Altria is partnering with with Philip Morris International Inc., which controls the Marlboro brand outside the U.S., to create new products aimed at reducing the risks associated with smoking traditional cigarettes. The companies are working on the “iQOS” electronic cigarette, which heats tobacco without causing combustion.

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