Altria Group, Inc. (MO) is a Trending Stock: Facts You Should Know Before You Bet On It – November 30, 2022

altria (MON Free Report) is one of the most followed stocks by Zacks.com visitors lately. As such, it might be a good idea to review some of the factors that could impact the stock’s near-term performance.

Over the past month, shares of this owner of Philip Morris USA, the country’s largest cigarette maker, have returned -0.7% compared to a +1.7% change in the Zacks S&P 500 Composite. During that period, the Zacks tobacco industry, which Altria falls under, is up 2.7%. The crucial question now is: What could the future direction of the stock be?

While news releases or rumors of a material change in a company’s business prospects will usually “trend” the stock and result in an immediate price change, there are always some basic facts that ultimately drive the buy-and-hold decision.

Revisions to earnings estimates

Rather than focusing on anything else, at Zacks we prioritize assessing the change in a company’s earnings outlook. This is because we believe the fair value of its stock is determined by the present value of its future income streams.

Essentially, our analysis is based on how sell-side analysts who cover the stock revise their earnings estimates to reflect the latest business trends. As earnings estimates for a company increase, so does the fair value of its stock. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, causing its price to move higher. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

Altria is expected to report earnings of $1.17 per share for the current quarter, a +7.3% year-over-year change. In the last 30 days, the Zacks consensus estimate has changed by +0.4%.

For the year-to-date, the consensus earnings estimate of $4.84 indicates a +5% change from a year ago. In the last 30 days, this estimate has remained unchanged.

For the next fiscal year, the consensus earnings estimate of $5.06 indicates a +4.6% change from what Altria was expecting a year ago. Over the past month, the estimate has changed by -0.1%.

Our proprietary stock ranking tool, the Zacks Rank, has a strong, third-party audited track record and provides a more meaningful picture of a stock’s near-term price action by effectively harnessing the power of earnings estimate revisions. Based on the size of the recent consensus estimate change and three other factors related to earnings estimates, Altria is rated Zack’s #3 rank (Hold).

The chart below shows the development of the company’s 12-month consensus EPS estimate:

12 Month EPS

Sales Growth Forecast

While a company’s earnings growth is arguably the best indicator of its financial health, not much happens if it can’t grow its revenue. It’s almost impossible for a company to grow its profits without increasing its revenue over long periods of time. Therefore, knowing a company’s potential revenue growth is crucial.

In Altria’s case, the consensus estimate of $5.13 billion for the current quarter indicates a +0.8% year-over-year change. The estimates of $20.79 billion and $21.01 billion for the current and next fiscal year indicate changes of -1.5% and +1.1%, respectively.

Latest reported results and surprise history

Altria reported revenue of $5.41 billion in its most recent reported quarter, a -2.2% year-over-year change. EPS of $1.28 for the same period compared to $1.22 a year ago.

Compared to the Zacks Consensus estimate of $5.62 billion, reported earnings represent a surprise of -3.7%. The EPS surprise was -2.29%.

Over the past four quarters, Altria has twice beaten consensus estimates for earnings per share. The company twice beat consensus sales estimates during the period.

valuation

No investment decision can be efficient without considering a stock’s valuation. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key factor in future stock price performance.

Comparing the current value of a company’s valuation multiples, such as B. Price to Earnings (P/E), Price to Sales (P/S) and Price to Cash Flow (P/CF), with its own historical values ​​help determine whether the stock is Fairly Valued, Overvalued or Undervalued while making the comparison of the company relative to its peers based on these parameters gives a good indication of how reasonable the stock price is.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to rank stocks from A to F (an An is better than a B; a B is better than a C; etc.) is quite helpful in determining whether a stock is overvalued, correctly valued, or temporarily undervalued.

Altria is rated C on this front, indicating it’s trading on par with its peers. Click here to view the values ​​of some of the assessment metrics that led to this grade.

bottom line

The facts discussed here, along with plenty of other information on Zacks.com, could help determine whether or not Altria’s market clamor is worth paying attention to. However, its No. 3 Zacks rank suggests that it could move in line with the broader market in the near future.

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