Altria (MO) in July reported second-quarter results that beat expectations, and the tobacco giant raised the low end of its full-year profit outlook. The stock is also in a base. So should you buy MO stock now? X The company, best known for selling Marlboros in the U.S., has faced questions about cigarette demand
Altria (MO) in July reported second-quarter results that beat expectations, and the tobacco giant raised the low end of its full-year profit outlook. The stock is also in a base. So should you buy MO stock now?
The company, best known for selling Marlboros in the U.S., has faced questions about cigarette demand amid rising health consciousness. While customers clung to their smoking habits last year amid the stress of the coronavirus pandemic, struggles continue at vaping startup Juul, which received a big investment from Altria.
Here’s a look at whether any buying opportunity for Altria stock exists against that backdrop.
Altria forecast full-year adjusted earnings per share of between $4.56 and $4.62. That’s a bit below Wall Street’s forecast for $4.60, according to FactSet. For the second quarter, Altria earned $1.23, up 12.8%. Sales grew 8.9% to $6.936 billion.
The company said the more upbeat forecast came on “continued confidence in our tobacco businesses,” investments in smoke-free products and its decision in July to sell its Ste. Michelle Wine Estates wine business to a private equity firm for around $1.2 billion.
However, Altria’s efforts to become less of a traditional cigarette company have hit a snag. The company said Philip Morris USA, which it owns, had delayed further expansion of its Iqos and Marlboro HeatStick heat-not-burn tobacco products. Altria cited the “uncertainty” stemming from a patent infringement case as the reason.
Elsewhere, Altria in late 2018 said it took a 35% stake in Juul. But Juul’s profit and sales expectations have faded. Competition and allegations over misleading health claims and efforts to target younger consumers have piled up.
North Carolina’s attorney general recently said that Juul had agreed to pay the state $40 million and undertake other sales restrictions. Lawsuits against Juul from around a dozen other states have made roughly the same accusations.
An FTC administrative trial over whether Altria (MO) stifled competition by investing in Juul is also underway. And the FDA is weighing whether to allow Juul’s products to be sold in the U.S.
Altria has also invested in Canadian cannabis company Cronos Group (CRON). Cronos Group’s size in Canada remains small compared to other publicly traded marijuana stocks on U.S. exchanges. Analysts have waited for more to come from that investment.
MO Stock Fundamental Analysis
Analysts expect Altria’s 2021 earnings to grow 6% this year and 5% next year, according to FactSet.
Top stocks usually have solid underlying earnings growth. But overall, MO stock falls far short of the CAN SLIM benchmark for 25% growth in earnings and revenue.
Sales growth for Altria has been choppy, bouncing between single-digit percentage gains and declines over recent years.
MO Stock Technical Analysis
MO stock is a flat base with a 52.69 buy point.
MO stock is still not close to the highs it reached in mid-2017. The stock’s relative strength line has been falling for years. When a stock’s relative strength line goes lower, that means it’s falling behind overall compared to the S&P 500.
So Is Altria Stock A Buy?
MO stock is in a base. But it is not yet in a buy zone.
The bottom line: Altria is not a buy yet.
Moreover, MO stock has mediocre ratings. Earnings growth might tick higher this year. But revenue has bounced between anemic growth and modest declines.
IBD recommends investors focus on stocks that are closer to their highs and that have Composite Ratings of 90 or higher.
Follow Bill Peters on Twitter at @IBD_BPeters.
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