MO Stock Falls 4% in a Month: Is Now the Right Time to Buy?

Altria Group, Inc. MO, well-known for its presence in the tobacco and vaping industries, has witnessed a 3.9% decline in its share price in the past month.  This compares with the Zacks Tobacco industry’s decline of 1.6% and the Zacks Consumer Staples sector’s deterioration of 2.6%. In contrast, the S&P 500 saw a modest increase of 0.4% over the past month.Altria has underperformed its competitors, including Philip Morris International Inc. PM, British American Tobacco p.l.c. BTI and Turning Point Brands, Inc. TPB.MO’s Price Performance Vs. PeersImage Source: Zacks Investment ResearchThis dip in Altria’s share price has many investors questioning whether it signals the start of a deeper downturn or an ideal opportunity to purchase at a discount. Let’s analyze the key factors at play and what it could mean for potential investors.Understanding the MO Stock DeclineAltria, like many companies, is subject to market fluctuations due to external and internal factors, contributing to its share price decline. Regulatory pressures, shifting consumer preferences toward smoke-free products and higher costs are affecting the company’s growth. The cigarette industry, in particular, has faced headwinds, with continued pressure from heightened consumer awareness of tobacco’s health risks and the growing popularity of illegal e-vapor products further contributing to the decline in cigarette volumes. These factors, combined with a constrained consumer spending environment, are weighing heavily on Altria's Smokeable Product revenue generation. Meanwhile, Altria's efforts to expand in the smoke-free category are being affected by the rapid rise of illicit e-vapor products. Despite the company’s focus on transitioning to smoke-free alternatives, these unauthorized products continue to undermine its e-vapor business and complicate regulatory enforcement, limiting potential growth in this area.Potential for Recovery: A Look at Altria’s UndervaluationAltria is currently trading at an attractive valuation relative to industry benchmarks. With a forward 12-month price-to-earnings (P/E) ratio of 9.61, the stock is trading lower than the industry average of 11.67 and the S&P 500’s P/E of 22.31. This suggests that Altria offers strong value for investors looking to gain exposure to the tobacco sector at a discounted price.Image Source: Zacks Investment ResearchAltria’s Solid Fundamentals Provide StabilityAltria is making major advancements toward a smoke-free future by focusing on harm reduction, regulatory compliance and innovative alternatives for adult smokers. NJOY, a central player in this strategy, has shown impressive growth with a 15% increase in consumable shipment volume and a nearly threefold rise in device shipments in the third quarter of 2024. In addition, Altria's on! oral nicotine pouch brand saw a 46% boost in shipments in the quarter.To accelerate its transition, Altria launched the “Optimize & Accelerate” initiative, aiming for at least $600 million in cost savings over the next five years. This plan includes operational improvements, technology adoption, and the use of generative AI and automation. The company is also diversifying its portfolio through strategic partnerships. It has formed a 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.Amid market uncertainties, Altria continues to leverage its pricing power, particularly through higher pricing strategies in its Smokeable Products and Oral Tobacco segments, demonstrating its resilience. Management's confidence in its strategy was reflected in its third-quarter earnings call, where it projected full-year adjusted earnings per share (EPS) in the range of $5.07-$5.15, suggesting 2.5-4% growth from $4.95 reported in 2023. This positive outlook further underscores the company's potential for continued growth.MO's Estimate Revisions Indicate Positive OutlookAnalysts are bullish on Altria's prospects, as reflected in its improving earnings estimates. Over the past seven days, the Zacks Consensus Estimate for Altria's current-year EPS has edged up a penny to $5.13, reflecting year-over-year growth of 3.6%. In the same time frame, the consensus mark for the financial next year's EPS has risen from $5.33 to $5.35, suggesting a jump of 4.2% from the year-ago period’s level.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Image Source: Zacks Investment ResearchIs it Wise to Buy MO Stock Now?Despite the recent stock dip, Altria's solid fundamentals, cost-saving initiatives and growth in the smoke-free space provide a strong foundation for recovery. With undervaluation relative to its industry peers and positive earnings revisions, Altria presents an attractive investment opportunity for those seeking long-term growth in the tobacco industry. At present, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Altria Group, Inc. (MO): Free Stock Analysis Report Philip Morris International Inc. (PM): Free Stock Analysis Report British American Tobacco p.l.c. (BTI): Free Stock Analysis Report Turning Point Brands, Inc. 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