What Are Altria’s Strategies For Long-Term Growth?

Altria (NYSE:MO) has an outstanding track record for creating value for its shareholders. For example, the company has boosted dividends for 46 years consecutively, after accounting for the impact of spin-offs. During the period 2010 to 2015, Altria produced adjusted diluted earnings per share growth at a compounded annual rate of ~8.1% and total shareholder returns of 204%, more than double the return of the S&P 500. Its tobacco operating companies have leading positions in the most profitable tobacco categories in the U.S. — cigarettes, smokeless tobacco, and machine-made cigars, with performance driven by its four premium brands: Marlboro, Black & Mild, Copenhagen, and Skoal. It follows a three-pronged strategy to deliver long-term growth for its shareholders:

1. Maximize Income From Core Premium Tobacco Businesses

Altria’s tobacco company is the largest in the U.S., and has over half the retail share of the cigarette market in the country. Its primary strategy is to maximize income, while at the same time maintaining modest share momentum over time on Marlboro. John Middleton, an Altria company, manufactures large machine-made cigars and pipe tobacco. Its core product is Black & Mild, which is the primary focus for driving share gains in the cigar category.

2. Grow New Income Streams With Innovative Tobacco Products

Altria’s smokeless tobacco segment is a leading producer of moist smokeless tobacco. The company is attempting to drive volume growth in this segment, while also trying to gain retail share in its two core brands — Copenhagen and Skoal. Nu Mark, Altria’s newest operating company, focuses on responsibly developing and marketing innovative tobacco products, with a strategy to succeed in the U.S. e-vapor category.

3. Manage Diverse Income Streams To Deliver Consistent Financial Performance

While the company earns a majority of its revenues from its tobacco products, it also has a highly profitable wine segment. Altria’s Ste. Michelle Wine Estates has a strong portfolio of premium brands, with a 13% compounded annual growth between 2010 and 2015. Furthermore, an approximately 27% economic interest in SABMiller allows the company to participate in the ~$36 billion global profit pool. Equity earnings from this stake have grown from $600 million in 2010, to a little over $1 billion in 2015, a compound annual growth rate of 10.9%.

Have more questions on Altria? Have a look at the links below:

• How Will Altria Perform In 2016?
• How Will The New FDA Ruling On E-Cigarettes Help Altria?
• What Is The State Of The Vapor Market In The U.S.?
• How Did The Different Segments Of Altria Perform In Q1 2016?
• Impressive Growth In The Smokeable Products Segment Helps Altria Beat Estimates
• How Will Altria Perform In Q1 2016?
• What Are Altria’s Strengths Driving Long-Term Growth?
• What Are Some Obstacles To Altria’s Long-Term Growth?
• How Will Altria’s Revenue And EBITDA Change In The Next 3 Years?
• How Has Altria’s Revenue And EBITDA Composition Changed In The Last 5 Years?
• Altria: Year 2015 In Review
• How Has Altria’s Shipment Volume, By Brand, Changed Over The Past 3 Years?
• How Has Altria’s Retail Share In Smokable Products And Smokeless Products Changed Over The Last Year?
• What is Altria’s Revenue And EBITDA Breakdown?
• What is Altria’s Fundamental Value Based On Expected 2016 Results?
• By What Percentage Did Altria’s Revenue & EBITDA Grow In The Last 5 Years?

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