On January 22, Morgan Stanley downgraded Altria Group (MO) from “equal weight” to “underweight.” The downgrade led Altria’s stock price to fall to a 52-week low of $44.57 on Tuesday before closing the day at $44.97.
Since the beginning of 2018, the company has lost 37.0% of its share value. During the same period, the stock price of its peers Philip Morris International (PM) and British American Tobacco (BTI) have fallen 31.1% and 51.6%, respectively.
Low valuation multiple
The steep fall in Altria’s stock price has also lowered its valuation multiple. On January 22, Altria was trading at 11.3x analysts’ 2018 EPS estimate of $4.00 and 10.6x their 2019 EPS estimate of $4.24 with its EPS expected to rise by 17.8% in 2018 and 6.2% in 2019.
In comparison, Philip Morris was trading at 14.5x analysts’ 2018 EPS estimate of $5.02 and 13.8x their 2019 EPS estimate of $5.28 with its EPS expected to rise by 6.4% in 2018 and 5.2% in 2019.
Attractive dividend yield
On December 12, Altria had declared dividends of $0.80 per share, which represents an annualized payout of $3.20. In 2018, the company paid dividends of $3.00, which represents growth of 18.1% from $2.54 in 2017.
As of January 22, the company’s dividend yield stood at 7.12% with its stock price trading at $44.97. On the same day, the dividend yield of Philip Morris and British American Tobacco stood at 6.26% and 8.32%, respectively.
Altria is scheduled to post its fourth-quarter earnings on January 31. Stay tuned for the pre-earnings review.