On Wednesday, BofA Securities adjusted its outlook on Altria (NYSE:MO), increasing the price target to $57 from the previous $52 while maintaining a Neutral rating on the shares. The firm cited several factors contributing to a brighter sentiment around the tobacco company, despite ongoing challenges in the industry.
Altria has demonstrated substantial pricing power and has seen regulatory developments that could potentially improve its market position. These include the approval of NJOY menthol products and a postponed ban on menthol cigarettes. Moreover, the formation of a new task force to tackle the issue of illicit trade is seen as a positive step for the industry.
Recent market data indicates that Altria's on! oral nicotine pouches are gaining ground, likely benefiting from shortages of competing product ZYN. Additionally, the pouches' competitive pricing and increased availability in stores are seen as advantageous.
Altria's financial strategy also shows promise for shareholders, with the company enhancing shareholder returns after partially divesting its stake in Anheuser-Busch InBev, adding $2.4 billion to its buyback program, and recently increasing its dividend.
On August 22, Altria's Board announced an annual dividend increase to $4.08 per share, up from $3.92, yielding an attractive 7.5% based on the closing price of $54.07 on that date. Despite these positive developments, concerns remain over the impact of illicit flavored vaping products on Altria's legal cigarette business in the U.S.
The analyst highlighted the issue of illicit trade spreading to other nicotine products, as indicated by Altria's management during their second-quarter call on July 24. Nonetheless, some regulatory progress has been made, which has notably reduced short interest levels from their March highs.
The revised price objective of $57 is founded on a valuation of 10.7 times the estimated earnings per share (EPS) for 2025, which remains unchanged at $5.32. This valuation represents a smaller discount of 0-5% compared to the previous 10-15%, aligning more closely with Altria's average P/E ratio since July 2017, when the FDA announced a more aggressive regulatory agenda. The firm reaffirmed its Neutral stance on Altria shares.
In other recent news, Altria Group (NYSE:MO), Inc. has been involved in significant developments. The company announced a 4.1% rise in its quarterly dividend, increasing it to $1.02 per share. This is part of Altria's strategy to grow its dividend per share by mid-single digits annually through 2028. Despite a slight decline for the first half of the year, the company reported stable adjusted diluted earnings per share (EPS) for the second quarter of 2024.
Altria also expanded its smoke-free portfolio with new products such as on! PLUS, showing growth and market share gains despite challenges from the illicit e-vapor market. The company adjusted its full-year 2024 guidance for adjusted diluted EPS to a range of $5.07 to $5.15. Stifel reaffirmed its Buy rating for Altria, citing the company's strong dividend payments and steady EPS growth outlook.
In addition, Altria's e-vapor subsidiary NJOY is challenging an initial determination by a U.S. International Trade Commission judge that supports allegations by JUUL Labs, Inc. that NJOY infringed on its patents. Both parties are in mediation to seek a resolution.
These are the recent developments in Altria Group's business activities.
InvestingPro Insights
Altria Group Inc. (NYSE:MO) has been catching the eye of investors and analysts alike, with BofA Securities recently raising its price target. To complement this perspective, InvestingPro data provides additional context for those tracking the company's performance. Altria boasts a market capitalization of $93.09 billion and is trading at a P/E ratio of 9.43, suggesting a potentially undervalued status compared to its near-term earnings growth. The company's gross profit margins stand impressively at 69.56%, reflecting strong operational efficiency over the last twelve months as of Q2 2024.
InvestingPro Tips highlight several points that could further interest shareholders and potential investors. Altria has a perfect Piotroski Score of 9, indicating a healthy financial state. Additionally, the company has been aggressively buying back shares and has raised its dividend for 14 consecutive years, showcasing a commitment to returning value to shareholders. For those seeking more in-depth analysis, there are over 15 additional InvestingPro Tips available at https://www.investing.com/pro/MO, which could provide more nuanced investment guidance.
With a dividend yield of 7.55% and a history of maintaining dividend payments for 54 consecutive years, Altria presents a compelling case for income-focused investors. The recent price performance also stands out, with a 34.02% total return over the past year, closely approaching its 52-week high. As the company continues to navigate the regulatory and market challenges, these metrics and insights from InvestingPro may offer valuable information for those considering an investment in Altria.
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