Altria Group: Strong Balance Sheet, Attractive Dividend And Top-Selling Brands

Altria Group Inc MO has raised its adjusted diluted EPS guidance for 2016, implying 7.5–9.6 percent growth from the 2015 levels.

Argus’ David Coleman maintains a Buy rating on the company, while raising the price target from $71 to $73.

The Positives

“The company has a strong balance sheet and pays a solid dividend with a yield of about 3.3 percent. It also has a range of top-selling brands, such as Marlboro & Parliament, that are able to command premium pricing, as well as less expensive brands that are less vulnerable to rising cigarette taxes,” Coleman mentioned.

Related Link: Jim Cramer Advises Viewers On Visa, Avon Products, Nordic American Tanker And Altria

The analyst also noted that Altria Group has lowered its exposure to the tobacco industry risks by expanding into non-tobacco businesses.

New Regulations

Coleman expects the company to benefit from the new regulations regarding the sale of e-cigarettes and vaporizers, given that higher safety costs have a larger impact on smaller manufacturers, who at present hold a large share of the smokeless market.

“Although the new regulations will not take effect for several years, they should benefit Altria and other large producers that have the resources to manage the FDA approval process. By pressuring smaller manufacturers, they could also be a catalyst for industry consolidation,” the analyst stated.

2Q Results

Altria Group reported its 2Q results on July 27, with the EPS beating the estimate and the consensus and the revenue net of excise taxes coming in flat with the year-ago quarter, although missing the consensus.

Full ratings data available on Benzinga Pro.