MO - Embedded Expectations Analysis - 2021 09 03
Altria Group, Inc. (MO:USA) currently trades below historical averages relative to UAFRS-based (Uniform) earnings, with a 12.0x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may be concerned about the smoke-free transition, the evolution of tax policy in the e-vapor segment, and the ITC's decision on IQOS products.Specifically, management may lack confidence in their ability to lead the transition of adult smokers to a smoke-free future, sustain strong financial performance, and maintain operating margins in the smokeable products segment. Additionally, they may have concerns about the International Trade Commission's decision on IQOS products, how excise taxes will evolve for e-vapor, and the impact of delayed state expansions on their existing markets. Furthermore, they may be overstating the potential of retail clerks to help guide the transition from smoking cigarettes to using heated tobacco products and may lack confidence in their ability to sustain performance in the Marlboro brand and be more efficient with retail promotional resources. Moreover, management may have concerns about bans on industry participation by scientific organizations and may be overstating their agility in making investments, the potential of their marketing initiatives to improve customer
awareness, and achievements in consumer takeaway volumes.
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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