Altria Group Cuts 2004 EPS View To $4.50-$4.60/Share
DOW JONES NEWSWIRES
May 11, 2004
By Christina Cheddar Berk Of DOW JONES NEWSWIRES
NEW YORK -- Altria Group Inc. (MO) said a settlement with the European Commission could reduce its 2004 earnings to a range of $4.50 to $4.60 a share.
In April, the New York company, which is the parent of Philip Morris USA and Kraft Foods Inc. (KFT), said it expected 2004 earnings in the range of $4.57 to $4.67 a share, including anticipated restructuring charges of 23 cents a share at Kraft and other items.
However, the forecast excluded any potential charges that could have resulted from a cooperation agreement its Philip Morris International unit was discussing with the European Commission.
The settlement, which is worth $1 billion over a dozen years, is aimed at reducing cigarette smuggling.
In a filing with the U.S. Securities and Exchange Commission late Monday, Altria said it expects the charges stemming from the smuggling accord to be about 11 cents a share.
The estimate includes an initial payment of $250 million and accruals for payments due on the first anniversary of the agreement.
Including these charges, and partly offset by the benefits of a lower tax rate that Altria expects to result from the final resolution of certain U.S. and foreign tax matters, the company's 2004 estimate falls to the range of $4.50 to $4.60 a share.
Altria earned $4.62 a share in 2003 after excluding items.
According to Thomson First Call, analysts, on average, expected the company would earn $4.85 a share this year. The estimate adds back the restructuring charges and other items.
According to the filing, the bulk of the anticipated tax benefits will occur in the second quarter.
Altria shares were recently trading at $54.15, down 74 cents, or 1.3%.
After seeing the charges outlined by Altria, several tobacco industry analysts reduced their estimates to reflect the impact of the European settlement.
The agreement, which was reported in April, provides for broad cooperation with European law enforcement agencies to help prevent contraband and counterfeit cigarettes.
The announcement of the pact came ahead of the European Union's expansion earlier this month to include 10 mostly Central and East European countries. With some of these new members charging lower cigarette taxes than current EU members, there was concern that the amount of cigarette smuggling could escalate.
Marlboro cigarettes, which are made by Philip Morris, are often counterfeited and smuggled.
Goldman analyst Judy Hong said in a research note Tuesday that she anticipated the EU settlement would be signed shortly.
An Altria spokesman said he couldn't comment beyond what was in the SEC filing.
Hong reduced her 2004 estimate for Altria by 3 cents to $4.79 for 2004 and by 4 cents to $5.11 a share for 2005 to reflect the accruals.
Merrill Lynch tobacco analyst Martin Feldman also lowered his 2004 estimate, bringing it down by 7 cents to $4.53 a share, using generally accepted accounting principles.
On an underlying basis, Feldman took his estimate down 3 cents to $4.80 a share.
In a research note, Feldman said the charges don't change Philip Morris' underlying business and "may in the longer term reduce smuggling in Europe."
Neither Feldman nor Hong own Altria shares. Both Goldman and Merrill have done investment banking business with the company. |
