On Friday, Citi reaffirmed its Neutral rating on Altria Group , Inc. (NYSE:MO) with a steady price target of $43.50. The stance comes amidst observations of high single-digit volume declines in the U.S. combustibles sector and increasing competition from alternatives such as Zyn in the modern oral category and NJOY, which is gradually gaining traction. The analyst noted that these market conditions make it challenging to identify fundamental positive catalysts for Altria's stock.
Altria's management is anticipated to reconfirm its full-year 2024 earnings per share (EPS) guidance of $5.05 to $5.17, aligning with Citi's estimate of $5.07 and the consensus of $5.09. The company's recent action of selling approximately 2% of its equity stake in ABInBev in March 2024 and the subsequent scaling up of its buyback program to around $3.4 billion are expected to provide technical support for the stock and potentially limit any significant downside.
Despite the technical support from the buyback, the analyst expressed caution due to the persistent challenges in the U.S. combustibles market. Moreover, with Altria's ongoing transition to next-generation products (NGPs), the firm believes it is premature to adopt a bullish outlook on the company. The transition poses uncertainties, and Altria has yet to demonstrate its effectiveness in navigating this change within the broader tobacco industry.
InvestingPro Insights
As Altria Group, Inc. (NYSE:MO) faces a challenging environment within the U.S. combustibles market, the company's financial health and investment attractiveness can be further understood through key metrics and insights from InvestingPro. With a market capitalization of $70.94 billion and a notably low P/E ratio of 9.03, Altria appears to be trading at a discount relative to its near-term earnings growth potential. The P/E ratio further adjusts to 8.35 when considering the last twelve months as of Q4 2023, underscoring the company's valuation appeal.
Altria's commitment to shareholder returns is evident through a high dividend yield of 9.49% as of early 2024, coupled with a history of raising its dividend for 54 consecutive years. This demonstrates a strong track record of consistent shareholder remuneration. Additionally, the company's gross profit margins stand at an impressive 69.53%, reflecting its ability to maintain profitability despite market headwinds. These financial strengths are complemented by an InvestingPro Tip highlighting Altria's impressive gross profit margins and its status as a company trading at a low earnings multiple.
For investors seeking further insights and tips on Altria, InvestingPro offers additional guidance, including 12 more InvestingPro Tips that can be accessed at https://www.investing.com/pro/MO. To enhance your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, granting you access to a wealth of expert analysis and data-driven investment tips.
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