Analysts who track Altria Group Inc. trimmed their 2004 earnings estimates for the company to account for new details it gave late Monday on potential charges for its draft cooperation agreement with the European Commission.
In early April, the European Commission and Philip Morris International, a unit of Altria that makes Marlboro and other cigarettes, said they were negotiating a $1 billion payment to end a dispute over cigarette smuggling.
When Altria reported first-quarter results a few weeks later, it stood by its earlier 2004 profit outlook of $4.57 per share to $4.67 per share. That view included 23 cents in anticipated charges related to Kraft Foods Inc.'s restructuring and the relocation of Philip Morris USA's headquarters, but did not include any potential charges related to the draft cooperation agreement.
In a filing on Monday with the U.S. Securities and Exchange Commission, Altria estimated potential charges for the agreement with the European Commission to be about 11 cents per share. Those charges include an initial payment of $250 million and accruals for payments due on the first anniversary of the agreement, New York-based Altria said.
Altria said that it expects 2004 earnings of $4.50 per share to $4.60 per share, including those charges and a lower overall effective tax rate, which it expects to result from the final resolution of certain U.S. and foreign tax matters.
Credit Suisse First Boston analyst Andrew Conway said he believes the agreement could be finalized sometime in the second quarter. He cut his 2004 earnings estimate to $4.82 per share from $4.85 per share to account for a settlement charge.
Merrill Lynch analyst Martin Feldman trimmed his 2004 GAAP earnings per share estimate by 7 cents to $4.53 after the company's filing. On an underlying basis, Feldman cut his 2004 estimate by 3 cents per share to $4.80.
Goldman Sachs analyst Judy Hong, who said she expects the EU settlement to be signed shortly, estimated reported earnings of $4.52 per share this year, in line with the company's forecast. Hong trimmed her earnings per share estimates by 3 cents to $4.79 for 2004 to reflect the EU settlement, but that view excludes certain charges.