By Angela Chen
Better-than-expected cigarette volumes at Altria Group Inc. led the company to adjust its earnings guidance higher on Wednesday, but the company said it expects cigarette shipments to slow during the second half.
The maker of Marlboro said cigarette shipment volume increased 3.1% in the second quarter as tobacco consumers benefited from relatively low gas prices and an improving economy.
As a result, Altria's net revenue after excise taxes rose 6.7% to $4.9 billion in the second quarter, compared to the year-earlier period. The company raised its earnings guidance by 1 cent and now expects per-share earnings of $2.76 to $2.81.
Altria Chief Executive Marty Barrington told analysts the coming quarters face tougher comparisons to year-ago periods when cigarette shipments improved as gasoline prices dropped by as much as 80 cents. The company also faces tax increases in several states that will cut into results.
But with housing starts up and unemployment down, Mr. Barrington said "the adult tobacco consumer continues to feel better." He said Altria is benefiting from that because consumers are choosing to buy higher-priced cigarettes like Marlboro over discount brands. He added, "You would hope and expect that will continue as long as the adult tobacco consumer continues to feel like they are in a better economic circumstance."
Reynolds American Inc., the No. 2 U.S. tobacco company behind Altria, on Tuesday was more optimistic about the cigarette volumes. The maker of Camel and Newport cigarettes said its cigarette volume increased 5.6% during the second quarter. Chief Executive Susan Cameron said she expects industrywide cigarette volume declines to slow to about 2% this year, less than previous declines of 3.2% last year and 4.6% in 2013.
Altria said its cigarette market share during the second quarter increased to 51.4% from 50.9% during the period. About half of that increase came from the company's Marlboro brand, which increased shipments 3% to 28.5 billion cigarettes.
Mr. Barrington said the new Marlboro packaging the company introduced in 2011 continues to perform well. The Marlboro Black packaging, which was designed for young adult smokers, had its 18th consecutive quarter of market share growth and "just continues to do gangbusters," Mr. Barrington said, especially in the 21- to 29-year-old age group.
The company's smokeless product segment, which is driven by moist snuff brands Copenhagen and Skoal, increased revenue after excise tax 4.4% to $447 million during the quarter. The Copenhagen brand drove much of that as shipment volume rose 5.4%. Skoal shipment volume was flat.
Earnings rose to $1.45 billion from $1.26 billion in the year-earlier quarter. Per-share earnings increased to 74 cents from 64 cents.
Angela Chen contributed to this story.
Write to Tripp Mickle at Tripp.Mickle@wsj.com