On Wednesday, Citi maintained its Neutral rating on Altria Group , Inc. (NYSE:MO) but increased the stock's price target to $44.50, up from the previous $43.50. This adjustment follows a review of the company's second-quarter performance and future expectations.
Altria's second quarter showed weaker smokeable product volumes, which led Citi to lower its full year 2024 (FY24) U.S. cigarette volume estimates to a decline of 9.8%. The forecasted decrease in sales for the second half of the year has resulted in approximately a 1% reduction in the firm's FY24 sales estimates.
Despite the lower sales and a significant miss in earnings before interest and taxes (EBIT) for the first half of the year, the analyst expects a smaller impact on the full year's EBIT. This is due to the end of last year's investment in Marlboro Black and the anticipated fourth-quarter benefit from the expiration of Master Settlement Agreement (MSA) legal fund payments, estimated to positively impact EBIT by $65 million each quarter.
The revised EBIT projections, combined with updated lower tax rate guidance of 24-25%, have led to a slight increase of 1% in the firm's FY24 earnings per share (EPS) estimates, now at $5.12. This figure aligns with Altria's new guidance range of $5.07 to $5.15.
Looking ahead to fiscal year 2025, the absence of MSA legal fees for three more quarters is expected to raise the FY25 EPS estimates by 2%. The culmination of these factors has informed Citi's decision to adjust Altria's target price to $44.50.
In other recent news, Altria Group Inc. has been a focus of recent developments. The company's Q2 adjusted earnings per share stood at $1.31, unchanged from the same period last year but falling short of the consensus estimate by three cents. This shortfall resulted from a 3.0% decrease in net revenue to $5.28 billion, missing the consensus by $120 million. In response, Altria revised its adjusted EPS guidance for 2024, suggesting a marginal improvement over the current consensus estimate.
CFRA raised its price target for Altria to $40.00 from $35.00, despite maintaining a sell recommendation. The firm based this decision on a forward P/E ratio lower than the company's five-year mean forward P/E. Meanwhile, Altria is facing potential significant impact due to a possible ban on menthol cigarettes, a matter currently under legal scrutiny by the Biden administration.
In other developments, Altria has filed a Premarket Tobacco Product Application for its on! Plus oral nicotine pouch products, indicating a strategic shift towards non-combustible products. The company is also dealing with issues related to a class action settlement concerning its Juul products, with about 80% of 14 million claims suspected to be fraudulent. These are the most recent developments in the company's operations.
InvestingPro Insights
Altria Group, Inc. (NYSE:MO) has been a subject of interest for investors, particularly in light of its recent performance and future outlook. According to real-time data from InvestingPro, Altria boasts a robust market capitalization of $83.91 billion, reflecting its significant presence in the industry. The company's P/E ratio stands at an appealing 10.22, indicating a potentially undervalued stock relative to its earnings. Moreover, Altria's impressive gross profit margin for the last twelve months as of Q1 2024 is a strong 69.45%, showcasing the company's ability to maintain profitability despite market challenges.
InvestingPro Tips highlight several key aspects of Altria's financial health and stock performance. Notably, Altria has demonstrated a commitment to returning value to shareholders, as evidenced by its high shareholder yield and a track record of raising its dividend for 14 consecutive years. Furthermore, Altria's stock has been trading at a low P/E ratio relative to near-term earnings growth, which could signal an attractive entry point for investors. The company's valuation also implies a strong free cash flow yield, underscoring its financial stability.
For those seeking additional insights, InvestingPro offers a variety of tips, with 19 more listed for Altria, providing a deeper dive into the company's financial nuances and stock behavior. These additional tips are available at: https://www.investing.com/pro/MO, offering valuable perspectives to investors looking to make informed decisions.
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