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Altria Group Inc MO

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Morningstar’s Analysis

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Unloved Altria's Q3 Shows Why the Tobacco Sector Is Misunderstood

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.

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Company Profile

Business Description

Altria comprises Philip Morris USA, U.S. Smokeless Tobacco, John Middleton, Ste. Michelle Wine Estates, Nu Mark, and Philip Morris Capital. It holds a 10.2% 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 40% share.

6601 West Broad Street
Richmond, VA, 23230
T +1 804 274-2200
Sector Consumer Defensive
Industry Tobacco
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 7,300