How Will Altria Stock Trend Post Q3 Results?

+12.47%
Upside
46.21
Market
51.97
Trefis
MO: Altria Group logo
MO
Altria Group

Altria (NYSE: MO) is scheduled to report its Q3 2022 results on Thursday, October 27. We expect MO stock to trade sideways, with its revenue and earnings aligning with the street expectations. Given the higher inflation, the company should continue to see a decline in cigarette volume. However, pricing growth will likely help offset the revenue loss from volume. Although we don’t expect much movement in MO stock based on its Q3 results, it has more room for growth from a valuation perspective, as discussed below. Our interactive dashboard analysis of Altria Earnings Preview has additional details.

(1) Revenues expected to align with the consensus estimates

  • Trefis estimates Altria’s Q3 2022 revenues to be around $5.6 billion, reflecting a low single-digit y-o-y rise and in line with the $5.6 billion consensus estimate.
  • Altria sells its tobacco products in the U.S.  Revenue is generated from selling cigarettes, oral tobacco, and smokeless products.
  • While the company is expected to see continued pricing growth, lower volume/mix will likely weigh on its top-line growth.
  • Looking at Q2 2022, the company reported net revenue of $5.4 billion, marking a 4% decline over the prior-year quarter.
  • The decline in revenue can be attributed to lower cigarette sales and the sale of its wine business in October 2021.
  • Our dashboard on Altria Revenues has more details on the company’s segments.
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(2) EPS likely to be in line with the consensus estimates

  • Altria’s Q3 2022 adjusted earnings per share (EPS) is expected to be $1.30 per Trefis analysis, aligning with the consensus estimate of $1.30.
  • The company’s net income of $2.3 billion in Q2 2022 reflected a modest 0.2% decline from the $2.3 billion figure seen in the prior-year quarter due to a 70 bps y-o-y rise in operating margin to 59.1%.
  • For the full-year 2022, we expect the adjusted EPS to be higher at $4.86 compared to the EPS of $4.61 in 2021.

(3) PM stock looks like it has some more room for growth

  • We estimate Altria’s Valuation to be around $51 per share, which is 12% above the current market price of $45.
  • At its current levels, MO stock is already trading at a 9x forward EPS estimate of $4.86, compared to the last three-year average of 10x, implying that it has little room for growth.
  • If the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for MO stock.

While MO stock looks like it has some room for growth, it is helpful to see how Altria’s Peers fares on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Ecolab vs. Philip Morris.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 MO Return 12% -4% -33%
 S&P 500 Return 6% -20% 70%
 Trefis Multi-Strategy Portfolio 2% -25% 197%

[1] Month-to-date and year-to-date as of 10/25/2022
[2] Cumulative total returns since the end of 2016

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