MO: Q1 Quick Take - Solid Qtr as Marlboro Brand Building Drives Share Gains and Profits - EPS of $0.49 as Expected

MO: Q1 Quick Take - Solid Qtr as Marlboro Brand Building Drives Share Gains and Profits - EPS of $0.49 as Expected

Hi,

· MO’s 1Q EPS of $0.49 Solid –MO reported adj Q1 EPS of $0.49, up 11.4%, in line with our/consensus estimates. Marlboro market share was 42.3% (up 0.1 point y/y and 0.7 point sequentially), driven by Marlboro Black. PM USA’s total increased to 49.4% (up 0.4 point y/y and 0.6 sequentially), driven by Marlboro and L&M.We maintain our Outperform rating and are encouraged that the new Marlboro brand architecture is profitably driving share gains. We’ll be interested to hear how confident mgt. is in maintaining Marlboro share gains.

· Total Adj. Cigarette Volume Flat – PM USA Taking Share -PM USA’s overall shipment volume declined 2.6%, or, after adjusting for trade inventories, roughly flat. This compares to total adj. industry shipment volume down -2.5% for 1Q12.

· Reaffirmed 2012 EPS Guidance of 6-9% Growth –Adj. dil. EPS expected to be in the range of $2.17 - $2.23, (up 6–9%), consistent with 2011 growth.

· Positives –1.) Smokeable products adj. OCI increased 3.9% with OCI margins up 150 bps, driven by strength in Marlboro; 2.) Smokeless adj. OCI increased 8.8% with OCI margins up 4.8%; 3.) Copenhagen vol. increased 5.5% with retail share up 2.7 points; 3.) Cigar volume was up 14.5%

· Negatives – 1.) Smokeable volume down 7.5% 2.)Smokeable products net revenues were down 0.8% due to lower volume and higher