Altria Group (MO) Shares: Has the Long-Term Bull Run Peaked?

TLDR

• Altria (MO) concluded trading at $66.80, having risen 26.9% in the last year and 91.9% over a five-year period.
• A Discounted Cash Flow (DCF) analysis estimates the intrinsic value at $99.44 per share, suggesting a 32.8% undervaluation compared to its present market price.
• The Price-to-Earnings (P/E) ratio stands at 16.12x, which is below the Fair Ratio of 23.27x, also indicating the stock is undervalued.
• A quarterly dividend of $1.06 per share was declared, offering a 6.3% yield, with payment scheduled for April 30.
• Analysts generally recommend a “Hold” rating, with an average price target of $65.75.

(SeaPRwire) –   Altria Group (MO) has experienced significant growth. The stock finished trading at $66.80, recording year-to-date increases of 16.6% and a 26.9% rise over the last year. Its five-year return stands at 91.9%.

Altria Group, Inc., MO

Such robust performance naturally prompts the question: how much of this growth is already reflected in the stock’s price?

On Friday, the stock commenced trading at $67.52. Its 50-day moving average is $66.41, while the 200-day moving average is $62.59. The stock’s price has fluctuated between $54.70 and $70.51 over the past 12 months.

In the fourth quarter, MO announced earnings per share (EPS) of $1.30, narrowly missing the consensus forecast of $1.32. Revenue reached $5.08 billion, marginally surpassing the $5.02 billion projection.

For the current fiscal year, analysts anticipate full-year EPS of $5.32.

Valuation Models Point to Upside

Utilizing a 2-Stage Free Cash Flow to Equity DCF model, Altria’s intrinsic value is calculated at $99.44 per share. This valuation is derived from a recent free cash flow of $9.11 billion over the past year, with an estimated FCF of $9.31 billion by 2028.

Compared to the present price of $66.80, the model indicates a 32.8% discount, suggesting the stock is undervalued.

The Price-to-Earnings (P/E) ratio presents a comparable scenario. MO’s P/E is 16.12x, which exceeds the tobacco industry average of 12.27x but falls short of the peer average of 18.63x. Simply Wall St’s proprietary Fair Ratio for MO is 23.27x, also indicating potential for appreciation based on this metric.

Altria possesses a market capitalization of $112.85 billion, a PEG ratio of 2.85, and a beta of 0.41, signifying relatively low volatility when contrasted with the overall market.

Dividend and Institutional Activity

Altria declared a quarterly dividend of $1.06 per share, scheduled for payment on April 30. The ex-dividend date was March 25. This translates to an annualized dividend of $4.24 per share, resulting in a 6.3% yield.

The current dividend payout ratio is 103.16%.

Regarding institutional activity, Westbourne Investments established a new position valued at approximately $995,000 in Q4, acquiring 17,261 shares. Other funds, such as V Square Quantitative Management, Yarger Wealth Strategies, and Powers Advisory Group, increased their existing holdings. MH & Associates Securities Management initiated a new stake valued at about $2.72 million.

Institutional investors collectively hold 57.41% of the company’s stock.

Analyst Ratings and Insider Moves

Wall Street analysts are divided. UBS maintains a buy rating with a $74 target. Citigroup has a neutral rating at $65. Barclays assigns an underweight rating at $63. Jefferies holds an underperform rating with a $50 target.

The overall consensus is a “Hold” with an average target price of $65.75, which is slightly below the stock’s current trading level.

From an insider perspective, SVP Charles N. Whitaker divested 27,908 shares on March 5 at an average price of $67.57, realizing approximately $1.89 million. This transaction reduced his holding by 13.37%. He retains 180,869 shares.

Corporate insiders collectively possess 0.08% of the stock.