MO - Embedded Expectations Analysis - 2021 05 28
Altria Group, Inc. (MO:USA) currently trades below historical averages relative to UAFRS-based (Uniform) earnings, with a 12.4x Uniform P/E. At these levels, the market has bearish expectations for the firm, but management may be concerned about expanding their IQOS business, sustaining non-combustible product consumption growth, and their JUUL investmentSpecifically, management may lack confidence in their ability to sustain incremental IQOS share gains, maintain oral nicotine product sales growth, and see improvements as a result of vaccination rollouts. Moreover, they may have concerns about the potential effect of a nationwide menthol ban on cigarette consumption, the impact of the modified risk tobacco product (MRTP) claim on IQOS, and the possibility of HeatSticks being taxed as a cigarette. Furthermore, management may lack confidence in their ability to increase consumer base engagement through their on! brand, expand their IQOS business utilizing digital capabilities, and transition adult cigarette consumers to noncombustible products. Additionally, they may be concerned about manufacturing capacity constraints, declining adjusted OCI margins, and the progress of the FTC trial against JUUL
Altria Group is a holding company. The company's subsidiaries include: Philip Morris USA Inc., which is engaged in the manufacture and sale of cigarettes; John Middleton Co., which is engaged in the manufacture and sale of machine-made cigars and pipe tobacco; Sherman Group Holdings, LLC and its subsidiaries, which are engaged in the manufacture and sale of cigarettes and the sale of cigars; and UST LLC, which through its subsidiaries, including U.S. Smokeless Tobacco Company LLC and Ste. Michelle Wine Estates Ltd., is engaged in the manufacture and sale of smokeless tobacco products and wine. The products of the company's tobacco subsidiaries include smokeable tobacco products and machine-made cigars.
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