How Much Upside Is Left in Altria’s Stock?



Stock performance

On November 9, 2016, California voters agreed to raise taxes on cigarettes and vaping devices. This decision led to a fall in Altria Group’s (MO) share price. However, since then, the stock has seen upward momentum.

On December 20, 2016, Altria was trading at a share price of $67.3, a rise of 9.1% over $61.7 on November 10, 2016. The company’s better-than-expected 3Q16 earnings and product innovations in the field of smokeless products appear to have increased investors’ confidence, leading to the rise in its share price.

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In 3Q16, analysts were expecting Altria to post adjusted EPS (earnings per share) of $0.81 on net revenue, excluding excise taxes, of $5.1 billion. The company beat analysts’ consensus estimate by posting adjusted EPS of $0.82 on net revenue of $5.2 billion. Read more about Altria’s 3Q16 performance in Smoking’s Paying Off for Altria: Just Look at These Numbers.

Year-to-date performance

Despite the downtrend in smoking, 2016 has been a good year for Altria. The company’s stock has returned 17.3% year-to-date (or YTD). In 2015, the company returned 18.9%. Since the beginning of 2016, Altria’s peers Philip Morris International (PM) and Reynolds American (RAI) have returned 4.3% and 23.8%, respectively, YTD.

By comparison, the First Trust Morningstar Dividend Leaders Index ETF (FDL) has returned 20.1%. FDL has 12.8% of its holdings invested in tobacco and cigarette companies.

Series overview

In this series, we’ll take a look at analysts’ estimates for Altria’s revenue and EPS for the next four quarters. We’ll also look at the company’s valuation multiple and analysts’ recommendations for its stock over the next 12 months.

Let’s start by looking at analysts’ revenue estimates for Altria.


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