Altria: Q2 Strong Cigarette Trends More Than Offset Other Setbacks (Preview)

Company Update (MO US) (Buy)

Summary

• Altria reported strong Q2 results this morning, with EPS growing 12.8% year-on-year, and raised its 2021 EPS growth outlook to 4.5-6%.

• The results were helped by inventory movements, which meant Altria's U.S. cigarette shipments actually grew 1.4% from last year.

• Excluding inventory, U.S. cigarette volume decline was just 4.5% in Q2, within the historic range and more than offset by strong price/mix.

• In Oral Tobacco, Altria is losing share but still growing profits. In IQOS, expansion has been delayed, but this doesn't change our Buy case.

• With shares at $47.62, we expect a total return of 65% (17.6% annualized) by 2024 year-end. The Dividend Yield is 7.2%. Buy.

Introduction

Altria released Q2 2021 results this morning. Shares are currently up 0.8% in pre-market trading (as of 8:45 am EST).

We upgraded our rating on Altria stock to Buy in February 2020. Since then shares have gained 11.0% (almost entirely due to dividends), lagging the approx. 35% gain in the S&P 500 significantly.

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