On Wednesday, Citi analysts maintained a Neutral rating on Altria Group Inc. (NYSE:MO) with a steady price target of $52.00. According to InvestingPro analysis, Altria currently trades at an attractive P/E ratio of 8.7x and offers a substantial dividend yield of 7.9%, having maintained dividend payments for 54 consecutive years.
The firm's projections suggest that Altria's fourth-quarter earnings for 2024 are anticipated to align with guidance and consensus expectations, and its full-year earnings per share (EPS) for 2024 could reach the higher end of the projected $5.07 to $5.15 range.
Citi's own estimate is slightly above consensus at $5.14, compared to the consensus of $5.13, partly due to the benefit of an additional selling day in the fourth quarter. InvestingPro data reveals impressive gross profit margins of 69.8% and an overall Financial Health Score of "GREAT," suggesting strong operational efficiency.
Despite this, Citi has expressed caution for the 2025 outlook, noting a negative shift in the trend of U.S. combustible product declines in December. Consequently, the firm has slightly reduced its EPS estimate for 2025 by 1%. The future earnings momentum and stock performance for Altria, according to Citi, largely hinge on an improving U.S. economic environment and stricter enforcement against illegal vapor products.
The possibility of heightened regulatory action on illicit vaping under the new administration makes it difficult to adopt a bearish stance. However, without clear immediate catalysts to drive growth, Citi prefers competitors like Imperial Brands PLC (LON:IMB) and British American Tobacco (NYSE:BTI) over Altria.
The analyst's comments reflect a cautious but not pessimistic outlook, suggesting that while there are potential positive developments on the horizon, the current situation warrants a wait-and-see approach.
In other recent news, Philip Morris International (NYSE:PM) received approval from the U.S. Food and Drug Administration for 20 ZYN nicotine pouch products, marking the first marketing authorization for nicotine pouches. This development is seen as a positive addition to the company's product portfolio.
In contrast, Altria Group faces challenges with its U.S. cigarette business, which constitutes 86% of its profit. However, Morgan Stanley (NYSE:MS) initiated coverage on Altria with an Equalweight rating and a price target of $54.00, predicting modest corporate revenue declines and earnings per share growth. In addition, BofA Securities upgraded Altria's stock from Neutral to Buy, citing potential positive earnings revisions.
Meanwhile, the Biden administration is expected to propose a limit on the amount of nicotine in traditional cigarettes, which could impact both Philip Morris and Altria. The U.S. Food and Drug Administration has also proposed a reduction in nicotine content in cigarettes, a move which could significantly shift tobacco regulation. Altria, on the other hand, has been demonstrating strong profitability with impressive gross profit margins of nearly 70% and is expected to meet its EPS growth target of 2-5% for 2024 and 2025.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.