On Wednesday, CFRA made an adjustment to the price target for Altria Group Inc. (NYSE:MO), increasing it to $40.00 from the previous $35.00, while still advising investors to sell. The firm's decision is based on a forward price-to-earnings (P/E) ratio of 7.7 times for the year 2025, which is lower than the company's five-year mean forward P/E of 9.6 times.
Altria reported a second-quarter adjusted earnings per share (EPS) of $1.31, which was consistent with the same period last year but fell short of the consensus estimate by three cents. The shortfall primarily resulted from a decrease in net revenue, which dropped 3.0% to $5.28 billion, missing the consensus by $120 million. The decline in revenue was attributed to a significant reduction in shipments, with smokable products seeing a 12.7% decrease and oral tobacco a 1.8% decline.
In response to these results, Altria has revised its adjusted EPS guidance for 2024, narrowing the range to $5.07-$5.15 from the previous forecast of $5.05-$5.17. The updated midpoint of this guidance suggests a marginal improvement over the current consensus estimate of $5.10.
The firm also noted that the upcoming U.S. election in November could introduce further uncertainty for the company's near-term stock performance. The analyst suggested that a victory for Donald Trump could lead to a more lenient regulatory environment for tobacco under the FDA, while a win for Harris would likely result in stricter regulations.
Altria Group Inc. is dealing with significant developments on multiple fronts. The company is currently anticipating a potential ban on menthol cigarettes, a move that could affect its annual revenue significantly. The Biden administration is seeking to dismiss a lawsuit demanding an end to the delay in banning these cigarettes, a case that could have far-reaching implications for companies like Altria.
In a different development, Altria has submitted a Premarket Tobacco Product Application for its on! Plus oral nicotine pouch products. This is part of the company's strategic move to cater to changing consumer preferences and regulatory landscapes, as it seeks to expand its non-combustible product portfolio amid increasing health consciousness among consumers.
Meanwhile, Altria is also dealing with issues around a class action settlement related to its Juul products. The settlement saw a significant number of fraudulent claims, with around 80% of 14 million claims suspected to be fraudulent.
InvestingPro Insights
Following CFRA's updated price target for Altria Group Inc. (NYSE:MO), InvestingPro data provides additional context for investors considering the company's financial health and market performance. Altria's impressive gross profit margin stands at 69.45% for the last twelve months as of Q1 2024, indicating a strong ability to control costs and maintain profitability. The company's commitment to shareholder returns is evident with a notable dividend yield of 7.75% and a history of raising its dividend for 54 consecutive years, underscoring its stability and attractiveness for income-focused investors.
Moreover, Altria's stock has been trading at a low P/E ratio of 10.06, which further contracts to 9.43 when adjusted for the last twelve months as of Q1 2024. This metric, combined with a PEG ratio of 0.19, suggests that the stock may be undervalued relative to its earnings growth potential. Additionally, the company has experienced a large price uptick over the last six months, with a 31.62% total return, reflecting positive investor sentiment and potential for continued growth.
InvestingPro Tips highlight that management has been aggressively buying back shares, a signal of confidence in the company's prospects. Furthermore, the platform notes that three analysts have revised their earnings upwards for the upcoming period, suggesting potential for future financial performance that exceeds current expectations. For investors seeking more in-depth analysis, InvestingPro offers additional tips on Altria Group Inc., which can be found at https://www.investing.com/pro/MO.
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