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Altria Group Inc MO

Morningstar Rating
$41.38 +0.07 (0.17%)
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Company Report

Altria Earnings: Risks Mount but Valuation Is Becoming Hard to Ignore

Altria reported third-quarter earnings per share of $1.19, in line with our estimate, but volume and revenue were a little light. Investors reacted negatively, with the stock down 8% in the day's trading following the release of results, most likely in response to management's effective lowering of full-year earnings per share guidance to a range of $4.91 to $4.98 to $4.89 to $5.03. The cigarette industry volume decline continues to be faster than its historical trend, and the imminent ban on menthol cigarettes could further accelerate that decline. However, the stock was trading at 8 times the midpoint of 2023 earnings guidance at the close of trading on Oct. 26, implying a dividend yield of 10%, which we believe undervalues the cash flows the business is likely to generate in the future. Although we have lowered our full-year earnings estimate by $0.02, this has no valuation impact and we retain our $52 per share valuation and our wide moat rating.

Price vs Fair Value

MO is trading within a range we consider fairly valued.
Price
$41.32
Fair Value
$17.00
Uncertainty
Medium
1-Star Price
$96.50
5-Star Price
$65.10
Economic Moat
Cwrdp
Capital Allocation
Ylxz

Bulls Say, Bears Say

Bulls

The U.S. market, while mature in volume terms, is a highly affordable one relative to other developed markets. This leaves headroom for price increases for many years.

Bears

As a U.S. pure play, Altria lacks exposure to some of the emerging markets in which total tobacco consumption is increasing, leaving it exposed to the secular decline rate that we estimate to be around 5% per year.

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News

Trading Information

Previous Close Price
$41.31
Day Range
$41.1741.43
52-Week Range
$39.0748.99
Bid/Ask
$41.37 / $41.38
Market Cap
$73.18 Bil
Volume/Avg
5.3 Mil / 8.6 Mil

Key Statistics

Price/Earnings (Normalized)
8.35
Price/Sales
3.58
Dividend Yield
9.20%
Dividend Yield (Forward)
9.49%
Total Yield
10.71%

Company Profile

Altria comprises Philip Morris USA, U.S. Smokeless Tobacco, John Middleton, Horizon Innovations and Helix Innovations. It holds a 10% interest in the world's largest brewer, Anheuser-Busch InBev. Through its tobacco subsidiaries, Altria holds the leading position in cigarettes and smokeless tobacco in the United States and the number-two spot in machine-made cigars. The company's Marlboro brand is the leading cigarette brand in the U.S. with a 42% annual share in 2022. Altria holds a 42% stake in cannabis manufacturer Cronos, has acquired Njoy Holdings in 2023, and recently exited its strategic investment in Juul Labs.
Sector
Consumer Defensive
Industry
Tobacco
Stock Style Box
Large Value
Total Number of Employees
6,300

Competitors

Valuation

Metric
MO
IMBBY
2914
Price/Earnings (Normalized)
8.358.1812.85
Price/Book Value
2.901.73
Price/Sales
3.580.552.42
Price/Cash Flow
7.905.8711.28
Price/Earnings
MO
IMBBY
2914

Financial Strength

Metric
MO
IMBBY
2914
Quick Ratio
0.150.300.97
Current Ratio
0.330.741.91
Interest Coverage
11.2716.616.72
Quick Ratio
MO
IMBBY
2914

Profitability

Metric
MO
IMBBY
2914
Return on Assets (Normalized)
24.41%8.66%7.20%
Return on Equity (Normalized)
42.93%13.03%
Return on Invested Capital (Normalized)
43.23%15.37%11.09%
Return on Assets
MO
IMBBY
2914

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