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Can We Expect an Upside Potential in Altria Stock?

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Stock performance

As of September 17, Altria Group (MO) stock was trading at $62.44, which represents a 7.9% rise since the announcement of its second-quarter earnings on July 26.

On September 12, Scott Gottlieb, commissioner of the FDA, announced that the accelerating trajectory of flavored e-cigarette usage among youths has reached epidemic proportions. He said the agency is considering a policy change that would ban flavored e-cigarette products.

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The growing popularity of e-cigarettes has had a negative impact on cigarette sales. The e-cigarette market is dominated by JUUL, which had 72% of the market share as of mid-August, according to Wells Fargo analyst Bonnie Herzog. A ban on flavored e-cigarettes is seen as favorable for Altria and could lead to a rise in the stock.

Altria stock was positively impacted by its strong second-quarter earnings and management’s raising the lower end of its 2018 EPS guidance.

Year-to-date performance

Despite the increase, Altria is still trading 12.6% lower than at the beginning of 2018. During that same period, peers Philip Morris International (PM) and British American Tobacco (BTI) have fallen 24.3% and 27.9%, respectively. Tobacco companies have been under pressure in 2018 due to increased anti-tobacco regulations and the lower total industry volume.

The Consumer Staples Select Sector SPDR ETF (XLP), which has invested 12% of its portfolio in cigarettes and tobacco companies, has returned -3.6% year-to-date.

Series overview

In this series, we’ll look at analysts’ revenue and EPS expectations for the next four quarters. We’ll also look at management’s guidance for 2018. Finally, we’ll look at analysts’ recommendations and the company’s valuation multiple. Let’s start by looking at analysts’ revenue expectations.

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