On Dec 6, 2013, we retained a Neutral recommendation on
Altria Group Inc.
). Our investment thesis is supported by a Zacks Rank #3
Why the Reiteration?
Altria's impressive brand portfolio of tobacco and wine
products helps it to maintain a strong business momentum and
generate decent profit. Altria's quick adaptation to the changing
consumer demand is the other positive. Moreover, Altria's strong
pricing power has helped it to remain afloat amid declining
Moreover, efficient cost management has helped Altria to
deliver strong earnings despite tough conditions in the tobacco
sector. In Oct 2013, Altria reported third quarter earnings of 65
cents per share surpassing both the Zacks Consensus Estimate and
the year-ago earnings by 1.5% and 12.1%, respectively. The
upswing in earnings came from higher operating income in the
smokeable and smokeless products segments, lower income tax and
lower outstanding shares prompted by the company's share buyback
Management reaffirmed its 2013 earnings guidance range of $2.36
to $2.41, representing an increase of 7% to 9% from $2.21 per
share in 2012. This reflects the benefits of the company's cost
reduction initiatives and positive pricing.
However, Altria has been witnessing a decline in cigarette
volumes since the past many quarters. The slowdown in the tobacco
industry, increasing health consciousness among consumers and
significantly higher prices of cigarettes has impacted volumes.
Moreover, the industry deals with increased regulation on
packaging (graphic warning labels) in some international markets
and heightened Food and Drug Administration concerns about the
effect of menthol and electronic cigarettes.
Stocks That Warrant a Look
Some better-ranked stocks in the consumer staples sector
Constellation Brand Inc.
Green Mountain Coffee Roasters Inc.
Con Agra Foods Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
CONAGRA FOODS (CAG): Free Stock Analysis
GREEN MTN COFFE (GMCR): Free Stock Analysis
ALTRIA GROUP (MO): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis
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