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Altria Group Inc. (MO)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Free Cash Flow to The Firm (FCFF)

Altria Group Inc., FCFF calculation

USD $ in millions

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12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net earnings attributable to Altria Group, Inc. 10,222  14,239  5,241  5,070  4,535 
Net earnings attributable to noncontrolling interests 5  5  2  –  – 
Net noncash charges (3,451) (10,153) 342  (213) 398 
Cash effects of changes in operating capital (1,854) (300) 225  (194) (558)
Net cash provided by operating activities 4,922  3,791  5,810  4,663  4,375 
Cash paid, interest, net of tax1 725  505  504  535  718 
Capital expenditures (199) (189) (229) (163) (131)
Free cash flow to the firm (FCFF) 5,448  4,107  6,085  5,035  4,962 

Based on: 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25), 10-K (filing date: 2014-02-26).

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Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the Altria Group Inc.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. Altria Group Inc.’s FCFF declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.

Interest Paid, Net of Tax

Altria Group Inc., interest paid, net of tax calculation

USD $ in millions

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12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Effective Income Tax Rate (EITR)
EITR1 -4.10% 34.80% 35.10% 34.80% 34.70%
Interest Paid, Net of Tax
Cash paid, interest, before tax 696  775  776  820  1,099 
Less: Cash paid, interest, tax2 (29) 270  272  285  381 
Cash paid, interest, net of tax 725  505  504  535  718 

Based on: 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25), 10-K (filing date: 2014-02-26).

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2017 Calculations

2 Cash paid, interest, tax = Cash paid, interest × EITR
= 696 × -4.10% = -29

Enterprise Value to FCFF Ratio, Current

Altria Group Inc., current EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in millions)
Enterprise value (EV) 103,421 
Free cash flow to the firm (FCFF) 5,448 
Ratio
EV/FCFF 18.98
Benchmarks
EV/FCFF, Competitors
Philip Morris International Inc. 17.84
EV/FCFF, Sector
Tobacco 18.21
EV/FCFF, Industry
Consumer Goods 27.22

Based on: 10-K (filing date: 2018-02-27).

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Enterprise Value to FCFF Ratio, Historical

Altria Group Inc., historical EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 134,273  153,976  132,679  120,941  81,968 
Free cash flow to the firm (FCFF)2 5,448  4,107  6,085  5,035  4,962 
Ratio
EV/FCFF3 24.65 37.49 21.81 24.02 16.52
Benchmarks
EV/FCFF, Competitors
Philip Morris International Inc. 23.52 24.24 21.96 21.47 15.81
EV/FCFF, Sector
Tobacco 23.86 28.94 21.89 22.50 16.03
EV/FCFF, Industry
Consumer Goods 28.85 28.61 25.60 24.37 19.63

Based on: 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25), 10-K (filing date: 2014-02-26).

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2017 Calculations

3 EV/FCFF = EV ÷ FCFF
= 134,273 ÷ 5,448 = 24.65

Ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. Altria Group Inc.’s EV/FCFF ratio increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.