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How Altria and Philip Morris’s Valuation Multiples Compare

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Altria’s valuation multiple

Altria Group (MO) reported its first-quarter earnings on April 25. During the quarter, the company failed to meet analysts’ revenue and EPS expectations. You can read our analysis on Altria’s first-quarter performance at Altria Down ~6% after Posting Disappointing Q1 Earnings.

After reporting its first-quarter results, the company’s management also lowered its domestic cigarette industry volume estimate for 2019. The weak first-quarter performance and the lowering of its domestic cigarette industry volume estimate led to a fall in the company’s stock price. Altria has lost 8.8% of its stock value since reporting its first-quarter earnings. The decline in Altria stock price also lowered its valuation multiple. As of May 28, Altria was trading at a forward PE multiple of 11.6x compared to 12.8x before the announcement of its first-quarter earnings.

Also, Altria is trading at 11.9 times analysts’ 2019 EPS estimate of $4.20, and 11.0 times analysts’ 2020 EPS estimate of $4.53 with EPS expected to rise by 5.2% in 2019 and 7.8% in 2020.

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Philip Morris’s valuation multiple

Philip Morris International (PM) reported its first-quarter earnings on April 18. For the quarter, the company had outperformed analysts’ revenue and EPS expectations. However, after reporting its first-quarter results, the company’s management lowered its adjusted EPS guidance for 2019 due to the higher impact from the consolidation of its Canadian subsidiary. The lowering of adjusted EPS guidance and weakness in the broader equity market has led to a fall in the company’s stock price. Philip Morris is trading 4.6% down since reporting its first-quarter earnings. The decline in Philip Morris’s stock price has also lowered its valuation multiple. As of May 28, PM was trading at a forward PE multiple of 15.4x compared to 16.3x before the announcement of its first-quarter earnings.

Also, PM was trading at 15.8 times analysts’ 2019 EPS estimate of $5.15, and 14.7 times analysts’ 2020 EPS estimate of $5.55 with its EPS expected to rise 0.9% in 2019 and 7.8% in 2020.

Analysts’ recommendations

Of the total 17 analysts that follow Altria, 47.1% are in favor of a “buy” rating, while 35.3% have given it a “hold” rating, and 17.6% have given it a “sell” ratings. On average, analysts’ 12-month price target for Altria stands at $58.73, which represents a rise of 17.8% from its stock price of $49.87.

Of the 19 analysts that follow Philip Morris, 57.9% are in favor of a “buy” rating, while 36.8% are recommending “holds,” and 5.3% are recommending “sells.” On average, analysts have given PM a 12-month price target of $94.06, which implies a return potential of 15.3% from its stock price of $81.55.

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