Altria: Earnings Growth Despite Bad 2022 Macro, But Little Other Good News
(Preview) Company Update (MO US) (Buy)
Summary
Altria Group, Inc. grew its operating income by 2% in 2022 despite reporting a cigarette volume decline of 9.5%, its worst since 2009.
The traditional tobacco earnings model of price hikes that exceed excise increases has produced earnings growth despite weak volumes.
Management has guided to a lower-than-usual 3-6% EPS growth in 2023 and also promised buybacks that are smaller than we expected.
The smaller Oral Tobacco segment has continued to lose profits and market share. Philip Morris is a threat, though only from 2024.
With Altria Group, Inc. shares at $47.06, the Dividend Yield is 8% and we expect a total return of 44% (15.4% annualized) by 2025 year-end. Buy.
Introduction
Altria Group, Inc. released Q4 2022 results this morning (February 1). As of 13:30 Eastern Standard Time, MO shares are up 4.5%, though still down 7.1% in the past twelve months.
We upgraded our rating on Altria to Buy in February 2020. Since then, MO shares have gained 21% (including dividends), though they …