Marlboro maker Altria Group Inc.'s net income rose 28 percent in the third quarter partly on lower costs and tax benefits, and higher cigarette prices more than made up for selling fewer smokes.
The parent company of Philip Morris USA, the nation's largest cigarette maker, also maintained its full-year earnings outlook.
Altria reported Wednesday that it earned $1.13 billion, or 54 cents a share, for the period ending Sept. 30. That's up from $882 million, or 42 cents a share, a year earlier. The results beat analysts' forecast of 52 cents a share.
The company, based in Richmond, Va., said net revenue excluding excise taxes climbed 3 percent to $4.46 billion, mostly on higher prices, surpassing Wall Street's $4.42 billion.
Its shares rose 13 cents to $24.88 Wednesday morning.
The improvements came despite a "very challenging and competitive business environment," CEO Michael E. Szymanczyk said in a conference call with investors. "The strengths of our adult consumer product businesses well position us to continue delivering superior returns."
Altria has been reining in expenses as tax increases, smoking bans, health concerns and social stigma make the cigarette business tougher. The company said it cut costs about $80 million in the third quarter and expects to save about $210 million more by the end of 2011. Those cuts are part of a larger initiative to reduce general and manufacturing costs by $1.5 billion compared with 2006.
The company also said increased earnings from its equity stake in brewer SABMiller and tax benefits of $33 million also pushed its results higher.
Cigarette revenue excluding excise taxes increased 4 percent to $3.88 billion during the third quarter on higher prices, while total cigarette volume fell 2.4 percent to 36.6 billion cigarettes from last year. Volume adjusted for seasonal variations declined 4 percent, in line with Altria's industry estimates.
Altria said its top-selling Marlboro brand gained 0.7 points of market share to end up with 42.6 percent of the U.S. market. But its other brands, including Virginia Slims, Parliament and Basic, lost market share.
Like other tobacco companies, Altria is focusing on cigarette alternatives _ such as cigars, snuff and chewing tobacco _ for future sales growth because of expected continuing declines in cigarette smoking industrywide. The company also owns a wine business.
Altria sold more of its smokeless tobacco brands such as Copenhagen and Skoal, as well as Marlboro Snus during the quarter. Excluding excise taxes, revenue from its smokeless tobacco business grew 11 percent to $363 million.
Its Black & Mild cigars saw volumes fall slightly, and revenue excluding excise taxes for those fell about 9 percent to $90 million.
Altria said its smokeless tobacco brands grew to 55.6 percent of the market, which is tiny compared with cigarettes. The cigar business lost retail market share during the quarter.
For the full year, Altria also expects net income in a range of $1.83 to $1.87 per share, up from its prior prediction of net income between $1.81 and $1.85 per share.
Altria reiterated its 2010 adjusted earnings outlook of $1.87 to $1.91 per share.
Analysts foresee earnings of $1.89 per share for the year.
AP Business Writer Michelle Chapman in New York contributed to this report.