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Altria Group reports 445% Net Income growth in 2020 and almost no change in EBITDA Margin of 53.4%

01/28/2021 • About Altria Group ($MO) • By InTwits

Altria Group reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Altria Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.1%. At the same time it's a lot of higher than industry average of 0.6%.
  • CAPEX is quite volatile: $40,140m in 2020, $16,861m in 2019, $13,427m in 2018, $11,955m in 2017, $7,804m in 2016
  • The company has highly profitable business model: ROIC is 28.5%
  • It operates with medium-size leverage: Net Debt/EBITDA is 2.2x while industry average is 2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


The company's Revenue increased on 5.3%. Revenue growth showed small slowdown in 20Q4 - it was 5.3% YoY. During the last 5 years Revenue growth bottomed in 2018 at 0.68% and was accelerating since that time. EBITDA Margin showed almost no change in 2020.

Gross Margin decreased slightly on 1.7 pp from 64.2% to 62.5% in 2020. During 2016-2020 Gross Margin topped in 2019 at 64.2%. SG&A as a % of Revenue decreased slightly on 0.91 pp from 11.2% to 10.3% in 2020.

Net Income margin jumped on 28.0 pp from -6.5% to 21.4% in 2020. During 2016-2020 Net Income margin bottomed in 2019 at -6.5%.

Investments (CAPEX, working capital and M&A)


Altria Group's CAPEX/Revenue was 1.1% in 2020. CAPEX/Revenue showed almost no change from 2017 to 2020. For the last three years the average CAPEX/Revenue was 1.2%. During the last 5 years CAPEX as a % of Revenue topped in 2019 at 1.2%.

Return on investment


The company operates at high and attractive ROIC (28.5%) and ROE (98.4%). ROIC increased on 4.2 pp from 24.3% to 28.5% in 2020. ROE jumped on 111 pp from -12.4% to 98.4% in 2020. During the last 5 years ROIC bottomed in 2018 at 22.8% and was growing since that time. During the last 5 years ROE bottomed in 2019 at -12.4%.

Leverage (Debt)


Company's Net Debt / EBITDA is 2.2x and Debt / EBITDA is 2.6x. Net Debt / EBITDA dropped on 0.3x from 2.5x to 2.2x in 2020. Debt increased on 5.1% while cash surged on 134%. During 2016-2020 Net Debt/EBITDA topped in 2018 at 2.6x and was declining since that time.

Altria Group has no short term refinancing risk: cash is higher than short term debt (329.7%).

Valuation and dividends


Altria Group's trades at EV/EBITDA 9.3x and P/E 17.7x.

Management team


William F Gifford Jr "Billy" is a Altria Group's CEO. William F Gifford Jr "Billy" has spent 11 months with the company. Altria Group's CFO Salvatore Mancuso "Sal" has spent 11 months years with the company.

Financial and operational results


FY ended 12/31/2020

Altria Group ($MO) key annual financial indicators

mln. $201620172018201920202020/2019
P&L
Revenue19,33719,49419,62719,79620,8415.3%
Gross Profit11,59111,96312,25412,71113,0232.5%
SG&A2,6502,3382,7562,2262,154-3.2%
EBITDA8,9669,8029,34210,55211,1305.5%
Net Income14,23910,2226,963-1,2934,467
Balance Sheet
Cash4,5691,2531,3332,1174,945133.6%
Short Term Debt086413,8481,0001,50050.0%
Long Term Debt13,88113,03011,89827,04227,9713.4%
Cash flow
Capex189199238246231-6.1%
Ratios
Revenue growth2.6%0.8%0.7%0.9%5.3%
EBITDA growth4.4%9.3%-4.7%13.0%5.5%
Gross Margin59.9%61.4%62.4%64.2%62.5%-1.7%
EBITDA Margin46.4%50.3%47.6%53.3%53.4%0.1%
SG&A, % of revenue13.7%12.0%14.0%11.2%10.3%-0.9%
Net Income Margin73.6%52.4%35.5%-6.5%21.4%28.0%
CAPEX, % of revenue1.0%1.0%1.2%1.2%1.1%-0.1%
ROIC32.0%27.8%22.8%24.3%28.5%4.2%
ROE181.7%72.5%46.1%-12.4%98.4%110.8%
Net Debt/EBITDA1.0x1.3x2.6x2.5x2.2x-0.3x

Altria Group ($MO) key quoterly financial indicators

mln. $20Q120Q220Q320Q4 YoY change
P&L
Revenue5,0465,0625,6785,055 15.0%-2.5%4.9%5.3%
EBITDA2,4012,8613,2222,646 4.8%3.3%7.4%6.3%
Net Income1,5521,943-9521,924 38.6%-2.7%--
Balance Sheet
Cash5,6164,8264,1234,945 67.5%168.7%157.0%133.6%
Short Term Debt3,0001,5001,5001,500 39.9%-30.0%50.0%50.0%
Long Term Debt26,97127,54227,75527,971 -0.2%1.6%3.2%3.4%
Ratios
Gross Margin56.9%64.9%65.5%62.2% -7.1%1.0%0.8%-2.0%
EBITDA Margin 47.6% 56.5% 56.7% 52.3% -4.6%3.2%1.3%0.5%
Net Income Margin 30.8% 38.4% -16.8% 38.1% 5.2%-0.1%31.3%75.7%

Peers in Tobacco


Below we provide Altria Group benchmarking against other companies in Tobacco industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Healthier Choices Management Corp ($HCMC)-22.6%13.1%3.2%-7.9%
 
Median (1 company)-22.6%13.1%3.2%-7.9%
Altria Group ($MO)-0.8%0.7%0.9%5.3%


Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Healthier Choices Management Corp ($HCMC)49.5%48.4%48.9%42.9%41.5%
 
Median (1 company)49.5%48.4%48.9%42.9%41.5%
Altria Group ($MO)59.9%61.4%62.4%64.2%62.5%


Top companies by EBITDA margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Healthier Choices Management Corp ($HCMC)-80.3%-76.8%-17.8%-21.6%-17.4%
 
Median (1 company)-80.3%-76.8%-17.8%-21.6%-17.4%
Altria Group ($MO)46.4%50.3%47.6%53.3%53.4%


Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Healthier Choices Management Corp ($HCMC)0.2%1.1%0.5%0.2%0.2%
 
Median (1 company)0.2%1.1%0.5%0.2%0.2%
Altria Group ($MO)1.0%1.0%1.2%1.2%1.1%


Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Healthier Choices Management Corp ($HCMC)--681.5%-48.9%-33.6%-27.3%
 
Median (1 company)--681.5%-48.9%-33.6%-27.3%
Altria Group ($MO)32.0%27.8%22.8%24.3%28.5%


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