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Altria (MO): A Beat in Store This Earnings Season?

We expect leading tobacco maker Altria Group Inc. MO to beat expectations when it reports first-quarter 2016 results before the market opens on Apr 28.

Last quarter, the company posted a negative surprise of 1.47%. Altria reported positive surprises in two of the last four quarters, reaching the average to a positive surprise of 0.40%.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Altria is likely to beat earnings because it has the right combination of the two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.47%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Altria currently carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Altria’s Zacks Rank #2 and positive ESP make us confident of an earnings beat in the first quarter of 2016.

What's Driving the Better-than-Expected Earnings?

Strong pricing and high volumes boosted Altria’s revenues in fiscal 2015. The company expects the trend to continue in the first quarter of 2016 as well.

The company is presently focusing on boosting growth at its e-cigarette category and less harmful alternative tobacco products, which is in line with changing consumer preferences. The extended agreement with Philip Morris International, Inc. PM regarding technology sharing and distribution of e-vapor products is also commendable.

In fiscal 2015, the Marlboro owner stepped up innovation and expanded the distribution of MarkTen XL e-vapor products and Green Smoke e-cigarettes in several lead markets which should drive sales in the to-be-reported quarter. Further, in Nov 2015, PM USA expanded the distribution of Marlboro Midnight Menthol nationally, offering adult smokers a bold menthol flavor. It was received well in the market and is expected to boost the top line in the to-be-reported quarter.

Other Stocks to Consider

Here are some other stocks that investors may also want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

AvonProducts Inc. AVP, with an Earnings ESP of +50.00% and a Zacks Rank #3 (Hold).

Coca Cola Enterprises, Inc. CCE, with an Earnings ESP of +2.50% and a Zacks Rank #2.

The Kellogg Co. K, with an Earnings ESP of +1.08% and a Zacks Rank #2.

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COCA-COLA ENTRP (CCE): Free Stock Analysis Report
 
AVON PRODS INC (AVP): Free Stock Analysis Report
 
KELLOGG CO (K): Free Stock Analysis Report
 
ALTRIA GROUP (MO): Free Stock Analysis Report
 
PHILIP MORRIS (PM): Free Stock Analysis Report
 
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