Altria Group, Inc. (MO) is one of the world's largest manufacturers and sellers of smokeable and oral tobacco products, with a market cap of $84.8 billion. Based in Richmond, Virginia, the company’s wholly owned subsidiaries include leading brands in smokable, smoke-free, and oral nicotine products. Some of its renowned brands are Copenhagen, Black & Mild cigars, and, of course, the legendary Marlboro.
Shares of this leading tobacco manufacturer have underperformed the broader market over the past 52 weeks. MO has gained 12.3% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 15.8%. But in 2024, things are looking- Altria Group's stock is up 22.6%, easily overshadowing SPX’s 8.7% rise on a YTD basis.
Zooming in further, MO has outperformed the US Consumer Goods iShares ETF’s (IYK) 2.6% gains over the past 52 weeks and roughly 8% returns on a YTD basis.
Altria is well-known for its generous dividend payments, which have drawn massive investor interest. Despite this, MO stock’s performance over the past year has been lackluster, reflecting broader challenges in the tobacco industry. Rising health concerns and tightening regulations are putting pressure on the company’s topline, leading to doubts about the sustainability of Altria's high dividend payouts.
These factors have introduced uncertainty about the company's long-term financial stability and its ability to maintain its impressive dividend track record. Shares of Altria Group fell 3.1% following its Q2 earnings release on Jul. 31 due to a 3% year-over-year decline in its revenue net of excise taxes, which missed analysts' estimates. This decline was primarily driven by lower net revenues from its core smokable-product segment, partially offset by higher net revenues from its oral tobacco products segment.
Nevertheless, despite industry challenges, the stock regained stability and hit a 52-week high on Aug. 2. This milestone is attributed to the company’s strategic initiative and its ability to innovate and adapt within its product portfolio while maintaining a significant presence in its core tobacco business.
For the current fiscal year, ending in December, analysts expect MO's EPS to grow 3.2% year over year to $5.11. The company's earnings surprise history is mixed. It beat the consensus estimates in one of the past four quarters while missing on three other occasions.
Among the 11 analysts covering the stock, the consensus rating is a “Hold.” That is based on four “Strong Buy” ratings, five “Holds,” and two “Strong Sells.”
Overall, this configuration has remained fairly steady over the past three months.
On Aug. 1, Stifel analyst Matthew Smith maintained a “Buy” rating on Altria Group and raised the price target to $54 - the Street-high price target, noting the company's "solid second quarter" and revised 2024 EPS outlook, with growth expected to accelerate in the second half. This new target implies a potential upside of 9.4% from the current price levels.
As of writing, MO is trading slightly above the mean price target of $48.19.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
