Altria: Which Matters Most? H1's 10% Volume Decline, 5% EPS Growth or 9x P/E?

Company Update (MO US) (Buy)

Highlights

• Cigarette volume fell 10%+ but net revenues grew

• Altria did much better than BAT in a difficult U.S. market

• We have low expectations for future earnings growth

• Shares have a 9.0x P/E and an 8.5% Dividend Yield

• At $44.30, we see a 54% upside (15.5% p.a.). Buy

Introduction

Altria reported Q2 2023 results on Monday (August 1). Shares have fallen by 2.5% since and are flat year-on-year:

Altria Share Price (Last 1 Year)

Source: Google Finance (03-Aug-23).

We upgraded our rating on Altria to Buy in February 2020. Since then shares have returned 19.5% in 3.5 years, a disappointing performance, with the share price falling 6.8% but more than offset by dividends. (For a recap of our investment case, see the first Altria article we published on Substack in April.)

Altria delivered positive revenue and earnings growth in a difficult quarter for the U.S. tobacco market. Altria’s U.S. cigarette volume fell by 8.7% year-on-year in Q2 (10% ex-inventory), but group Net Revenues After Excise grew 1.2%…