Altria Group, Inc. MO stock is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 9.85, representing a 16.9% discount compared to the Zacks Tobacco industry’s average of 11.85. This suggests that MO is undervalued, particularly when compared to key industry competitors such as Philip Morris International Inc. PM, which has a higher P/E ratio of 16.92, and Turning Point Brands, Inc. TPB, which trades at an even higher multiple of 19.34.

While this lower valuation could attract value-driven investors, it may also signal market concerns regarding Altria’s growth prospects. The discount could reflect skepticism about the company’s ability to meet or exceed market expectations or indicate a potential mispricing of its true value.

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For investors considering MO stock, it’s essential to thoroughly evaluate Altria’s strengths and challenges within the broader tobacco industry. Understanding its fundamental performance, growth outlook, and competitive positioning is key to making an informed investment decision.

Altria’s stock closed at $52.60 on Thursday, which is 9.4% below its 52-week peak of $58.04, reached on Nov. 27, 2024. Over the past year, MO has delivered impressive performance, rising by 30.8%, outperforming the industry’s 28% gain. In addition, it has surpassed both the Zacks Consumer Staples sector, which grew by 1.6%, and the S&P 500, which saw a 27.3% increase during the same timeframe. Altria has also outpaced its competitor, British American Tobacco BTI, which saw a 24.2% rise over the last year.

MO’s Price Performance vs. Industry, S&P 500 & Sector

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At present, Altria's stock is trading above its 100-day and 200-day moving averages, signaling a bullish trend. With this strong upward momentum, it’s crucial to assess MO’s future prospects and consider the best strategy for incorporating it into your portfolio.

MO Trades Above 100 & 200-Day Moving Average

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Altria’s Triumph and Challenges for the Year

Altria is making significant strides toward a smoke-free future, focusing on harm reduction, regulatory compliance and innovative alternatives for adult smokers. A key component of this strategy is NJOY, which has shown impressive growth in the e-vapor market, with a notable rise in product satisfaction, retail visibility, and shipment volumes. 

In third-quarter fiscal 2024, NJOY's consumable shipment volume grew by 15%, and device shipments nearly tripled. In addition, Altria's oral nicotine pouch brand, on!, experienced a 46% increase in shipment volume. To further advance its smoke-free vision, Altria launched the "Optimize and Accelerate" initiative, targeting at least $600 million in cost savings in the next five years through operational improvements and technology adoption.

However, Altria faces significant challenges in this transition, particularly from the rapid rise of illicit flavored disposable e-vapor products, which have seen a 45% increase in users over the past year. This trend threatens the growth of Altria’s NJOY brand and complicates regulatory enforcement, limiting the potential for its compliant products. Furthermore, the company’s domestic cigarette volumes saw an adjusted decline of 11.5% in the fiscal third quarter, exceeding the industry’s average decline of 9%, underscoring the difficulties in maintaining growth within its core smokable products segment.

Despite these hurdles, Altria has leveraged its strong pricing power to navigate market challenges, particularly through higher pricing strategies in the Smokeable Products and Oral Tobacco segments, showcasing its resilience. The company is also diversifying its portfolio through strategic partnerships, such as its joint venture with Japan Tobacco to develop the Ploom heated tobacco device, positioning itself to capitalize on the growing heated tobacco market. With planned PMTA and MRTP filings for early 2025, Altria is poised to seize opportunities in this expanding sector.

Positive Analyst Sentiment for MO Stock

Analysts are bullish on Altria's prospects, as reflected in its improving earnings estimates. Over the past 30 days, the Zacks Consensus Estimate for Altria's fiscal 2024 earnings per share (EPS) has edged up by a penny to $4.12, indicating year-over-year growth of 3.4%. In the same time frame, the consensus mark for fiscal 2025 EPS has risen from $5.30 to $5.33, suggesting a jump of 4.1% from the year-ago period.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Altria Stock: Investors’ Guide

Altria is making strides toward a smoke-free future, driven by strong growth in NJOY e-vapor and on! oral nicotine pouches. Amid challenges from illicit products and declining cigarette volumes, the stock shows resilience through strategic partnerships and pricing power. While MO appears attractive at its current valuation, the decision to invest in the stock requires careful consideration of both its growth strategies and ongoing challenges within the tobacco industry. For now, maintaining positions in Altria appears prudent. The company presently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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