Should you buy Altria Group shares in June?

By:
on Jun 2, 2021
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  • Altria could be a good choice for any investor seeking secure dividend income
  • Altria expects adjusted diluted EPS in the range of $4.49 to $4.62 for the 2021 fiscal year
  • Everything indicates that the price could stabilize soon above the $50 resistance level

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Altria Group, Inc. (NYSE: MO) shares have advanced more than 20% since the beginning of January 2021, and the current share price stands around $49.50. Altria is a stable company with a good position in the market, while its shares could be a good choice for any investor seeking secure dividend income.

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Fundamental analysis: Altria expects adjusted diluted EPS in the range of $4.49 to $4.62 for the 2021 fiscal year

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Altria Group is an American corporation and one of the world’s largest producers and marketers of tobacco, cigarettes, and related products. Altria Group is previously known as Philip Morris Companies, and according to estimates, this company could expand its market share even more in the upcoming years.

Altria Group has a strong demand for its products and the right management team to scale and improve efficiency. Morgan Stanley reported this week that shares of this company should move “upside from the current levels” as an FTC administrative trial is set to begin this week.

Altria reported its first-quarter results in the last week of April; total revenue has decreased by -3.4% Y/Y to $4.88 billion, while the non-GAAP EPS was $1.07 (beats by $0.02). Total revenue has decreased above the expectations (-$110 million) mainly due to the Covid-19 pandemic, and the company reaffirmed its guidance for 2021 full-year.

Altria expects adjusted diluted EPS in the range of $4.49 to $4.62 for the 2021 fiscal year, representing a growth rate of 3% to 6% from an adjusted diluted EPS of $4.36 in the 2020 fiscal year. Altria began the second quarter in a strong position, but some negative news could hit the profitability and revenues in the upcoming quarters.

According to the rumors, the Biden administration may raise excise taxes on cigarettes which would certainly negatively influence the business of Altria. Financial and research company Argus lowered its rating on Altria Group to hold from a buy and reported that it expects lower adjusted EPS from Altria.

“In particular, the FDA recently said that it planned to ban menthol cigarettes and was considering rules that would reduce cigarette nicotine to nonaddictive levels. In addition, the Biden administration may raise excise taxes on cigarettes,” said Kristina Ruggeri, an analyst from Argus.

Despite this, Altria Group shares are still undervalued relative to the market, and this company could deliver substantial shareholder value for many years to come. Altria trades at less than ten times 2020 EBITDA, the dividend yield is around 6.97% at the current share price, and with a market capitalization of $91 billion, shares of this company are not expensive.

Technical analysis: $50 represents the first resistance level

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Data source: tradingview.com

If the price jumps above $50 resistance, it would be a signal to trade shares, and the next target could be around $52. Rising above $54 supports the continuation of the bullish trend for Altria shares, but if the price falls below $44, it would be a strong “sell” signal.

Summary

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Altria trades at less than ten times 2020 EBITDA, and its shares could be a good choice for any investor seeking secure dividend income. Altria Group shares continue to be supported, and for now, everything indicates that the price could stabilize soon above the $50 resistance level.

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