Altria: On Sale Again After Q1 With 7% Dividend Yield And 11x P/E (Preview)

Company Update (MO US) (Buy)

Summary

• Altria shares are trading at a 7% Dividend Yield and an 11x P/E after falling 11% from their mid-April peak, even with solid Q1 results.

• Smokeable volume fell 12% in Q1 due to prior-year COVID-related stocking up, but strong pricing meant EPS was down only 1.7%.

• Management still expects 2021 EPS growth of 3-6%; the robust cigarette business on its own is sufficient for our investment case.

• Altria's progress with e-vapor, nicotine pouches and heat not burn remains limited, but closer ties with Philip Morris are now more likely.

• With shares at $46.60, we expect an exit price of $64 and a total return of 69% (17.5% annualized) by 2024 year-end. Buy.

Why is Altria Stock Falling?

Altria stock fell 1.2% on Thursday (April 29) to $46.60, after the company released its Q1 2021 results. Since a high of $52.31 in mid-April, Altria shares have fallen by 11%, following reports that the FDA is re-launching proposals to ban menthol and regulate nicotine levels in tobacco products.

We believe Q1 res…