Analyst Note
| Philip Gorham, CFA, FRM |Altria reported another robust performance in the third quarter, as evidence is gathering that tobacco has been one of the more defensive categories during the pandemic. Consolidated net revenue grew by 4.9% year over year on the back of a modest 2% underlying cigarette volume decline. Adjusted operating income grew by almost 9% over the same period a year ago, implying EBIT margin expansion of 2.2 percentage points, and adjusted earnings per share was flat. Given the lack of visibility into the near-term performance of many businesses, we are surprised that the market seems to have overlooked this resilient performance, and we think Altria is both mispriced and misunderstood. We are retaining our $54 fair value estimate and wide moat rating.