NEW YORK (AP) _ Altria Group Inc., the world's largest tobacco company and maker of Marlboro cigarettes, said Thursday it expects to log a $1 billion tax benefit that will boost both its earnings and profit at subsidiary Kraft Foods Inc.
Separately, Kraft _ the maker of Oscar Mayer hot dogs and Oreo cookies _ said Altria will reimburse the company $337 million in federal tax reserves and $29 million in interest. Kraft will also get $39 million in state tax reversals for a total gain in 2006 of $405 million, or 24 cents per share. Altria owns about 87 percent of Kraft, Northfield, Ill.
The $1 billion tax benefit is the result of an audit by Internal Revenue Service of Altria's federal tax returns between 1996 and 1999. Altria expects to record a total gain of $960 million, or 45 cents per share, after the reimbursement.
In a move that will partially offset the one-time gains, Kraft agreed Thursday to sell its Milk-Bone pet snacks business to rival Del Monte Corp. for $580 million. Kraft expects to record a charge of 7 cents per share on the deal; Altria will record a charge of 5 cents per share.
Lumping together the tax benefit and divestiture charge, Altria raised its 2006 earnings outlook to a range of $5.25 to $5.35, from an earlier estimate of $4.85 to $4.95.
Kraft upped its profit forecast by 17 cents to a range of $1.55 to $1.60 per share. The guidance includes 50 cents in charges related to the company's restructuring program.
A poll by Thomson Financial showed analysts expect Altria to earn $5.28 per share in 2006 and project per-share profit at Kraft of $1.88, excluding one-time charges and gains.
Several investment brokerages were uninspired by the news Thursday.
Morgan Stanley analyst David J. Adelman said the ``big headline'' would not change his view on Altria's stock or its value. He rates the stock ``Overweight'' with a $77 price target.
``Today's announcements should be completely neutral to Altria's stock,'' Adelman said in a client note.
Shares of the cigarette maker edged higher in midday trading, adding 11 cents to $73.98 on the New York Stock Exchange. Meanwhile, Kraft shares shed 7 cents to $30.07 on the exchange.