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Msg  13064 of 13083  at  10/30/2020 8:41:35 AM  by

Korynd

The following message was updated on 10/30/2020 8:45:21 AM.

MO reports Q3 earnings

MO reported adjusted EPS of $1.19 in the third quarter of 2020, unchanged versus the same quarter in 2019. For the full year 2020, they upped the low end of their guidance, and now expect $4.30 to $4.38 in adjusted EPS, which would be 2-4% growth over the
$4.21 earned in 2019.
 
Since they have already reported $3.37 in combined EPS thru three quarters, by subtraction this anticipates a 4th quarter EPS of $0.93 to $1.01. That would be slightly down from the $1.02 posted in 2019.
 
MO took several more one-time write downs in the quarter. Most significant was writing down their JUUL investment by another $2.6 billion.  Their 35% of JUUL investment is now carried on the books at just $1.6 billion, down from the $12.8 billion they paid less than two years ago. It also implies a valuation of all of JUUL of $4.57 billion, less than half of what JUUL's CEO recently assessed its value at.
 
Operationally, things were pretty solid:
Cigarettes: Most importantly, MO reversed the decline in Marlboro market share seen earlier in the year, leaving it unchanged at 43.3% of the market during the third quarter, while still maintaining/expanding margins. The discount category as a whole also declined by 2/10ths of a share point in the quarter, lessening the pressure on premium brands. The entire US cigarette industry volume in the quarter actually rose 1%, likely driven by people abandoning e-vapor plus the stimulus money fueling consumer spending. MO's volume was down less than 1%, mostly reflecting lower volumes of their discount brands.
Cigars: Continues to be MO's brightest spot, albeit in a relatively small division. Volumes and revenue were up 10% in the quarter.
Smokeless: MO still playing catch-up to competitors in the oral pouch segment. They again expanded distribution and sales of "on!", but still significantly trail products like Reynolds Velo. That has resulted in MO losing market share in smokeless, which was 49.9% of the market at the end of the third quarter, down from 52.3% last year.
Alcohol & Other: Even ignoring JUUL, MO's other investments are are still all pretty negative. BUD eliminated their interim dividend payment yesterday, while reporting so-so third quarter results. CRON largely just treading water and slowly bleeding cash. MO had to record one-time charges for both investments due to pass through of special losses for goodwill/sale impairments. The investment in BUD is still carried on MO's books at a considerably higher value (~$5 billion) than the current market value of the shares. The lockup period of those shares expires 10-10-21.


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