Citi updated its outlook on Altria Group Inc (NYSE:MO), a leading tobacco company, by increasing its price target on the stock to $48.00, up from the previous $44.50. The firm has kept a Neutral rating on the shares, indicating a cautious stance on the company's near-term prospects.
"The ongoing challenging backdrop for combustibles is likely to weigh on Q3 delivery," said Citi analysts.
As a result, the firm has lowered its third-quarter and full-year U.S. combustible volume estimates, positioning them below the market consensus.
The analyst's forecast for Altria's full-year 2024 earnings per share (EPS) is $5.09, which sits at the lower end of the company's own guidance range. Despite these adjustments, the analyst anticipates that Altria's management will likely reaffirm their full-year guidance metrics.
Altria's stock has shown strong performance throughout the third quarter of the calendar year. However, the analyst suggests that in the absence of another significant shift toward defensive stocks, Altria's shares may experience a downward trend in the upcoming weeks.
In other recent news, BofA Securities has increased its price target for Altria from $52 to $57, maintaining a neutral rating on the shares. The revised price target is based on a valuation of 10.7 times the estimated earnings per share (EPS) for 2025, which remains at $5.32. Stifel reaffirmed its buy rating for Altria, highlighting the company's strong dividend payments and steady EPS growth outlook.
Altria has also raised its quarterly dividend by 4.1%, from $0.98 per share to $1.02 per share. This increase aligns with Altria's strategy to grow its dividend per share by mid-single digits annually through 2028. The company reported a steady adjusted diluted EPS for the second quarter of 2024, despite a slight decline for the first half of the year.
InvestingPro Insights
Altria Group's financial metrics and market performance offer additional context to Citi's analysis. According to InvestingPro data, Altria boasts a compelling P/E ratio of 8.62, significantly lower than many of its peers in the consumer staples sector. This low valuation is further supported by an InvestingPro Tip highlighting that Altria is trading at a low earnings multiple, which could suggest the stock is undervalued relative to its earnings potential.
Despite the challenges in the combustible products market noted by Citi, Altria maintains impressive profitability metrics. The company's gross profit margin stands at a robust 69.56% for the last twelve months as of Q2 2024, with an InvestingPro Tip pointing out Altria's "impressive gross profit margins." This strong profitability could provide a buffer against industry headwinds.
Investors may find Altria's dividend yield of 8.17% particularly attractive, especially in the current market environment. An InvestingPro Tip notes that Altria "pays a significant dividend to shareholders," which is further reinforced by the company's 8.51% dividend growth over the last twelve months. This commitment to shareholder returns could support the stock's value, even as Citi anticipates potential short-term pressure.
For those seeking a more comprehensive analysis, InvestingPro offers 15 additional tips on Altria, providing a deeper understanding of the company's financial health and market position.
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