Should Altria Stock be in Your Portfolio Ahead of Q3 Earnings?

Altria Group, Inc. MO is slated to report third-quarter 2024 earnings on Oct. 31. The Zacks Consensus Estimate for revenues is pegged at $5.29 billion, which indicates a 0.2% increase from the year-ago period. The consensus mark for earnings has remained unchanged in the past 30 days at $1.36 per share, which implies 6.3% growth from the year-ago quarter’s figure. MO has a trailing four-quarter negative earnings surprise of 0.9%, on average.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Image Source: Zacks Investment ResearchEarnings Whispers for AltriaOur proven model doesn’t conclusively predict an earnings beat for Altria this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here. Altria currently carries a Zacks Rank #4 (Sell), with an Earnings ESP of -0.74%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Altria Group, Inc. Price, Consensus and EPS Surprise Altria Group, Inc. price-consensus-eps-surprise-chart | Altria Group, Inc. QuoteFactors to Note Ahead of MO’s Q3 Earnings ReleaseAs Altria prepares to announce its third-quarter results, its strategic shift toward the smoke-free product segment will be in focus. The company has been steadily expanding its reduced-risk product lineup, including offerings like NJOY and on!, to meet rising consumer demand for alternatives to traditional cigarettes amid growing health awareness. This aligns with broader industry trends, as seen with Philip Morris International’s PM successful brands IQOS and ZYN.Focusing back on Altria, we anticipate that its strength in smoke-free products is likely to have contributed in the third quarter. However, the investments required for advanced research, development and marketing efforts to bolster its smoke-free product line may have weighed on margins.Despite efforts to grow its footprint in the reduced-risk products space, Altria’s primary revenues remain tied to its Smokeable Products segment, which has been under substantial strain. The cigarette industry navigated notable challenges in the second quarter and the first half of the year, with shipment volumes remaining under significant pressure. This decline can be linked to persistent macroeconomic issues and the swift rise of illegal disposable e-vapor products.Adult smokers still feel the financial strain from prolonged inflationary impacts and limited discretionary spending. The rapid growth of unregulated e-vapor products, fueled by insufficient enforcement, has accelerated an unexpected shift from traditional cigarettes to these illegal alternatives. As a result, Altria’s Smokeable Products segment (which contributed 88.5% to the company’s total revenues in the second quarter) has seen revenue declines for several consecutive quarters, impacting the overall top line.If these pressures persist into the third quarter, Altria may continue to see revenue contraction unless mitigated by growth in its smoke-free categories. Nevertheless, Altria’s strong pricing power may have helped offset some of these challenges, providing a buffer to the company’s bottom line.MO’s Price Performance & ValuationDue to pressing concerns, shares of Altria have dipped 1.6% in the past three months against the industry’s growth of 5.9%. Altria has also trailed the broader Zacks Consumer Staples sector and the S&P 500’s respective gains of 0.5% and 6.1% in the same time frame.MO Price Performance vs. Industry, S&P 500 & SectorImage Source: Zacks Investment ResearchAltria is currently trading at a premium compared to its industry peers like British American Tobacco p.l.c. BTI and Turning Point Brands, Inc. TPB. Altria’s forward 12-month price-to-sales ratio stands at 4.18, higher than the industry’s ratio of 3.97. This overvaluation implies that investors are potentially paying a premium for Altria’s stock relative to its anticipated sales performance. Altria’s Value Score of D further underscores these fears.Image Source: Zacks Investment ResearchInvestment Thesis on MOAltria’s pivot toward smoke-free products like NJOY and on! is encouraging, yet its dependence on traditional cigarettes presents a significant vulnerability. The cigarette industry continues to face declining volumes amid macroeconomic challenges and a surge in illicit e-vapor products, which are diverting smokers away from regulated options. Apart from this, Altria’s smoke-free strategy is expensive, requiring substantial investments in R&D and marketing, which may weigh on margins. Investors should weigh these challenges carefully and approach Altria’s stock with caution.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want 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. (TPB): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks