Monday, March 11, 2013

US Big Tobacco Corps 2012 Annual Earnings Up 3.1% and EPS Up a Much Higher 6.8%

I found 4 US Big Tobacco Corps filing with the SEC which generated Non-GAAP Adjusted After-tax Net Income or Net Loss of over $1 bil each in either annual 2012 or annual 2011.

Non-GAAP Adjusted After-tax Net Income, which is generally used by the investment community to value common stocks, was used when this amount was disclosed in the company's earnings release, and it excludes Special, Unusual Items which are significant in amount relative to Reported GAAP Net Income.

The Total Non-GAAP Adjusted After-tax Net Income of these 4 US Big Tobacco Corps was $16.1 bil in annual 2012, up 3.1% over 2011.

And on an Earnings Per Share basis, the total growth was a much more robust 6.8%, which was a company-earnings-weighted 3.7%, or 119%, higher than the 3.1% total earnings growth.

So, what's with this substantial add-on 3.7% earnings growth on an EPS basis, as compared with the 3.1% growth on just an earnings growth basis.  After all, EPS and EPS growth are what drive common stock prices.

It's the massive common stock buyback programs that all of these US Big Tobacco Corps have.  The US Fed has facilitated this with its extremely low interest rates, which makes these common stock buyback programs incredibly lucrative for all large US Corps, and the US Big Tobacco Corps have taken this common stock buyback strategy to a completely different level.   

But the problem with these massive stock buyback programs is that they only benefit the very wealthy and they further expand the huge wealth gap between the very wealthy and everyone else, including small businesses, who are not able to take economic advantage of it.

And these massive common stock buyback programs have been one of the major reasons for the US stock market advancing so high as compared what has been happening with the US general economy and with US real GDP growth.

Why?  Well, by increasing annual earnings growth from 3.1% to 6.8% on an annual EPS growth basis, the intrinsic value of the common stock goes up dramatically, thus causing an artificially high stock market bubble.  The US stock market is not increasing so dramatically because the US economy is growing at the same pace.  Instead, the US stock market is growing so dramatically because of the artificially high EPS growth, caused by the massive common stock buybacks, which have been fueled by US Fed action on interest rates and by clear lack of US Congressional oversight.  And this artificially high US stock market predominantly benefits economically only the top 1%, leaving the remaining 99% even further behind.

And instead of legislating to more fairly deal with this, the US Congress just sits there and twittles its thumbs.  

Below here is the Non-GAAP Adjusted After-tax Net Income for both annual 2012 and 2011 for each of these 4 US Big Tobacco Corps:




Annual Annual Adjusted Adjusted

2012 2011 Net Net Adjusted Growth

Non-GAAP Non-GAAP Income Income EPS Positive

Adjusted Adjusted Increase Increase Increase %

Net Net (Decrease) (Decrease) (Decrease) Spread
Income Income Amount % %

mils of $s mils of $s mils of $s


Phillip Morris Intl
8,800 8,591 209 2.4% 6.6% 4.2%
Altria Group
4,483 4,243 240 5.7% 7.8% 2.1%
Reynolds American
1,686 1,647 39 2.4% 5.7% 3.3%
1,103 1,101 2 0.2% 7.2% 7.0%

Total all 4
16,072 15,582 490 3.1% 6.8% 3.7%