On Friday, Stifel reaffirmed its Buy rating on shares of Altria Group Inc (NYSE:MO) with a steady price target of $50.00. The endorsement follows the U.S. Food and Drug Administration's (FDA) recent authorization of four NJOY menthol flavored e-vapor products, marking the first such approval for menthol e-vapor by the agency.
The analyst from Stifel views the FDA's decision as beneficial for Altria and other major e-vapor brands. The authorizations are expected to provide a boost to the legal e-vapor market while complementing ongoing enforcement efforts aimed at curtailing the availability of illicit products.
Although NJOY currently holds a modest market share within the e-vapor category, the analyst anticipates that the brand will gain from enhanced distribution, improved visibility, and a market trend favoring legally sanctioned products as regulatory actions against illicit offerings intensify.
Altria's stock retains its Buy rating due to the company's potential to capitalize on the evolving regulatory landscape. The $50 price target reflects the firm's confidence in Altria's prospects amidst these developments in the e-vapor sector.
The FDA's authorization is seen as a step towards greater regulatory clarity for the e-vapor market. It is expected to have a ripple effect, benefiting established brands like Altria by potentially increasing the market share of legal products and reducing competition from unauthorized alternatives. The Stifel analyst's outlook suggests that Altria is well-positioned to leverage these regulatory changes in its favor.
In other recent news, Altria Group Inc reported a significant increase in first-quarter sales, surpassing Wall Street's sales forecasts. The company's net revenue reached $5.58 billion, exceeding analyst predictions of $4.71 billion. This surge is attributed to higher pricing strategies and a growing consumer interest in smokeless tobacco alternatives. Altria also reported a 32.1% rise in shipment volumes for its nicotine pouch product, On!
Still, Altria has been facing challenges with fraudulent claims in class action settlements. Last year, the company saw around 80% of 14 million claims suspected to be fraudulent in a $45.5 million settlement related to its Juul products. The issue of fraudulent claims is a growing concern, not only for companies like Altria but also for legal professionals and claims administrators.
Amid these developments, Citi maintained a neutral stance on Altria's stock due to high single-digit volume declines in the U.S. combustibles sector and increasing competition from alternatives. Altria's management is expected to reconfirm its full-year 2024 earnings per share guidance of $5.05 to $5.17, aligning with Citi's estimate.
In addition, anti-smoking organizations have initiated legal action against the U.S. government, urging the enforcement of a ban on menthol cigarettes. The delay in implementing the ban has allowed tobacco companies to continue exploiting menthol cigarettes to attract youth, women, and particularly the Black community. Altria and British American Tobacco (NYSE:BTI) derive over 20% of their revenue from menthol products, as estimated by Morningstar analyst Philip Gorham.
InvestingPro Insights
The recent FDA authorization of NJOY's menthol e-vapor products bodes well for Altria Group Inc (NYSE:MO), as reflected in Stifel's reaffirmed Buy rating and a $50.00 price target. The optimism around Altria's positioning in the evolving regulatory landscape is echoed by InvestingPro data and insights.
With a market capitalization of $78.38 billion and a robust gross profit margin of 69.45% over the last twelve months as of Q1 2024, Altria showcases significant financial strength. Moreover, the company's commitment to shareholder returns is evident through a high dividend yield of 8.63% and 54 consecutive years of dividend payments, underlining its stability and attractiveness to income-focused investors.
Two key InvestingPro Tips highlight Altria's strategic financial maneuvers and investment appeal: the aggressive share buyback program and the impressive streak of raising dividends for 14 consecutive years. These actions demonstrate management's confidence in the company's value and its dedication to delivering shareholder returns.
Moreover, Altria's stock is trading at a low P/E ratio of 9.54 relative to near-term earnings growth, suggesting potential undervaluation. For investors seeking deeper analysis, there are 13 additional InvestingPro Tips available, providing a comprehensive view of Altria's financial health and future prospects.
Interested investors can take advantage of these insights and more by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing their investment strategy with premium data and expert analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.