Altria Group, Inc. MO has been showing impressive upward momentum, trading above its 200-day and 50-day simple moving averages (SMA), which are key indicators of price stability and long-term bullish trends. As of Wednesday, MO was trading at $51.04, which surpassed both its 200-day SMA of $43.36 and 50-day SMA of $50.51, highlighting a continued uptrend.
SMA is a key tool in technical analysis used to assess price trends by smoothing out short-term fluctuations, offering a clearer view of the stock's longer-term direction. This technical strength, along with the stock's sustained momentum, reflects positive market sentiment and investor confidence in Altria’s financial health and growth prospects.
Image Source: Zacks Investment Research
Shares of Altria have risen 12.3% in the past three months. While trailing the industry’s growth of 18%, Altria has fared better than the broader Zacks Consumer Staples sector and the S&P 500’s respective gains of 9% and 4% in the same time frame. MO stock currently stands 7.1% below its 52-week high of $54.95, scaled on Sept. 5.
Image Source: Zacks Investment Research
Decoding Altria’s Growth Story
Altria’s growth story is largely driven by its strategic pivot toward reduced-risk, smoke-free products, capitalizing on evolving consumer preferences that prioritize health-conscious alternatives. With increasing awareness of the health risks associated with smoking, many consumers are shifting to reduced-risk products. Altria has seized this opportunity through innovative product offerings and strong performance in key areas.
A central component of Altria’s strategy is its expanding portfolio of smoke-free products, most notably the NJOY e-vapor line, which delivered impressive share and volume growth in the second quarter of 2024. NJOY’s success is evident in the rise of both consumables and device shipments, signaling strong market demand for smoke-free alternatives. This momentum highlights Altria's capability to attract adult smokers seeking alternatives to traditional tobacco products, setting it up for continued growth in this burgeoning market.
Altria's proactive retail expansion has been instrumental in driving the growth of NJOY. By tripling NJOY's retail footprint to more than 100,000 stores, the company has secured premium shelf space, amplifying product visibility and accessibility. Altria has also rolled out trial-generating activities, boosting NJOY's market share. This targeted approach not only broadens the customer base but also enhances brand recognition. The introduction of new products like on! PLUS in international markets shows Altria’s capability to innovate and capture market share in the rapidly growing nicotine pouch segment.
Altria's oral nicotine products, particularly the on! brand, are also driving growth. In the second quarter of 2024, the Oral Tobacco Products segment reported a 4.6% increase in revenues, reaching $711 million, bolstered by a 37% year-over-year surge in shipment volumes for on! The growing demand for tobacco-derived nicotine (TDN) products in the U.S. market reflects a broader trend toward lower-risk alternatives, where Altria is well-positioned alongside other industry leaders such as Philip Morris International PM, which is expanding its smoke-free offerings with products like IQOS and ZYN.
Even as MO shifts its focus toward reduced-risk products, its traditional cigarette business remains a significant contributor to its revenue. Marlboro, the company’s flagship brand, continues to command a dominant 42% share of the U.S. premium cigarette market. The brand’s strong consumer loyalty and aspirational appeal help sustain demand despite broader industry declines. Altria’s robust pricing strategy has enabled the company to maintain profitability even as cigarette shipment volumes decline. While higher prices might lead to reduced consumption, the addictive nature of cigarettes often results in consumers absorbing these increases, ensuring continued revenue generation for the company.
Altria: A Dividend Powerhouse
Altria has long been recognized as a dividend powerhouse due to its commitment to returning value to shareholders. This reputation continues into 2024 as the company’s robust dividend payouts and share buybacks underscore its appeal to income-focused investors. Altria recently announced a 4.1% increase in its quarterly dividend, taking it to $1.02 per share. This marks the company’s 59th dividend hike in the past 55 years.
In the first half of 2024, MO had distributed more than $5.8 billion through dividends and share repurchases. These significant payouts reflect Altria’s disciplined approach to capital allocation. What makes the company more attractive to income investors is its current dividend yield, which stands at an impressive 7.8%. Altria’s dividend payout ratio of 81.3%, while high, can be viewed positively when considering the company’s financial stability and strategic outlook. A high payout ratio signals confidence in the company’s ability to generate consistent cash flows from its operations, even amid challenges.
For investors seeking regular returns, Altria’s dividend policy is a standout feature, providing steady cash flow in a period of market uncertainty.
What to Expect From MO in 2024?
Altria's strong brand equity and established market presence provide a solid foundation for resilience in a competitive landscape. For 2024, the company envisions adjusted earnings per share (EPS) in the range of $5.07-$5.15, which suggests 2.5-4% growth from the $4.95 recorded in 2023. Management expects the bottom-line growth to be skewed toward the second half of 2024 and includes the impact of two extra shipping days in 2024.
Reflecting optimism around Altria, analysts have revised their EPS estimates upward. Over the past 30 days, EPS estimates for the current quarter and fiscal year have increased by a penny each to $1.36 and $5.11, respectively. These estimates suggest year-over-year growth rates of 6.3% and 3.2%, respectively.
Image Source: Zacks Investment Research
Altria's Compelling Valuation Metrics
Altria's current valuation presents a compelling opportunity for investors, given its strong market position and attractive pricing relative to its peers like Japan Tobacco Inc. JAPAY and Turning Point Brands, Inc. TPB. Trading at a forward 12-month P/E ratio of 9.72, Altria not only offers a discount compared to the industry average of 11.77 but also stands significantly below its five-year high of 11.87. This suggests that the market may not fully recognize the company's robust fundamentals and potential for growth.
Image Source: Zacks Investment Research
MO Stock: A Strategic Guide for Investors
Altria's business, built around its flagship Marlboro brand and expanding smoke-free portfolio, generates reliable cash flows, which allows the company to maintain high dividend payouts. Despite headwinds like declining cigarette volumes, the company’s pricing power in the premium tobacco market helps offset these declines. With an attractive P/E ratio, regular dividends, commitment to innovation and solid market presence, Altria represents a potential value investment for those looking to capitalize on a company poised for future success. MO currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Altria Group, Inc. (MO) : Free Stock Analysis Report
Philip Morris International Inc. (PM) : Free Stock Analysis Report
Turning Point Brands, Inc. (TPB) : Free Stock Analysis Report
JAPAN TOB (JAPAY) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
