Altria: Why Investors Should Look Past Q2 Revenue And Profit Decline
(Preview) Company Update (MO US) (Buy)
Summary
Altria saw declines in both its revenues and operating income in Q2 as macro headwinds led to an 11% drop in its cigarette volume.
However, the results were made worse by some one-off items, and Altria reiterated its outlook for a 4-7% EPS growth in 2022.
Underlying trends in the U.S. cigarettes business are stable, and recent FDA actions on e-vapor can benefit Altria earnings.
We expect a stable U.S. cigarette market. Altria can now free itself to compete in e-vapor, and struggling Oral Tobacco segment is small.
At $44, Altria has a 9x P/E and an 8.2% Dividend Yield. We expect a total return of 74% (20.0% annualized) by 2025 year-end. Buy.
Introduction
Altria Group, Inc. released Q2 2022 results on Thursday morning (July 28). MO stock finished the day flattish (down 0.2%).
We upgraded our rating on Altria to Buy in February 2020. Shares currently have a gain of 11% since our upgrade, with dividends more than offsetting a 7% decline in the share price, having fallen 23% from their Apr…