Tariff-resistant Altria Group (NYSE: MO) is still a good buy in 2025 because its business profitability is improving despite declining sales. The decline in sales is primarily due to reduced use of smokeable products, offset by increasing use of consumable and smokeless products.
The critical detail for investors is that this profitable business with virtually no direct exposure to tariffs is leaning into quality, improving its cash flow, and sustaining a solid capital return program. The capital return is why you own this stock; it includes robust share repurchases and a dividend expected to grow annually.
The dividend alone is substantial, worth $1.7 billion in Q1, or an annualized 7% as of April's close. The payout is reliable due to the robust cash flow, strong balance sheet health, positive earnings growth outlook, and substantial share repurchases. Repurchases topped $326 million in Q1, reducing the count by 3.9% and significantly offsetting the cost of distribution increases.
The current authorization is dwindling but remains sufficient to continue buybacks at the current pace through the end of the year, and an additional allotment is expected to be authorized as the fiscal year draws to a close.
There are some negatives on Altria’s balance sheet, including an impairment related to NJoy devices, which are now banned for import, and an increased deficit, but these are not red flags for investors. The NJoy impairment was well telegraphed, while the deficit is due to the aggressive share buybacks, which are improving shareholder leverage and helping sustain the dividend growth outlook.
The critical details are that the cash flow is positive, the company is well-capitalized, has ample inventory, and low leverage, with total liabilities just over 1x assets.
Altria: Earnings Growth in Q1 and Solid Guidance for the Year
Altria had a decent quarter in Q1 despite the headwinds of declining use of smokeable products and the impairment of NJoy. The company’s $4.52 billion in revenue is down 4.2% YOY and missed the consensus by a fair margin, but is offset by the earnings strength. On a segmental basis, lower shipment volumes in the smokeables were partially offset by higher pricing, while in Oral, revenues increased by 0.5%. The 0.5% gain is driven by a 24% increase in consumables, offset by a 70% decline in devices. The mix is expected to shift 100% to consumables as existing inventory runs out.
The earnings news is better. Despite a top-line contraction, the company logged a 6% per-share earnings growth due to the compounding effect of increased operating income at the segment level and a reduced share count. The $1.23 is also a nickel ahead of MarketBeat’s reported consensus and plays into the guidance and capital return outlook. The company reaffirmed its outlook for earnings in 2025, expecting 2% to 5% growth compared to last year, with $5.375 at the midpoint, or nearly $0.04 better than expected.
Analysts and Institutions Hold Altria
Analysts and institutional trends are at least supportive of Altria’s stock price, with eight analysts rating a firm consensus of Hold and a price target of around $55. Institutions are also buying in the first half of 2025, providing a tailwind for the market. The question is whether they will feel compelled to buy in the wake of the guidance update or wait for prices to pull back before continuing the trend.
The price action following the release suggests institutions and retail investors are buying this stock. The market opened with a loss but regained traction quickly and moved higher, showing support at the 30- and 5-day EMAs, suggesting a move to test the multi-year high is coming. Critical resistance targets are near the current highs, in the range of $60. A move above that level would pave the way to a more sustainable uptrend that could take this market up to the $80 level within the next 18 to 24 months.
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