March 2, 2018

MO – Market expectations are for record-high Uniform ROA, but management has concerns about volumes, market share, and their debt profile


      • Altria Group, Inc. (MO:USA) currently trades at historical averages relative to UAFRS-based (Uniform) Earnings, with a 19.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about volumes, market share, and their debt profile
      • Specifically, management may have concerns about the sustainability of tax benefits, and may also be concerned about further declines in cigarette volume. Additionally, they may lack confidence in their Marlboro Black Label and Marlboro Ice innovations, and may be concerned about further retail share loss, predominantly for Skoal. Furthermore, they may be exaggerating their ability to take advantage of marketplace conditions in light of their debt profile, and may be concerned about low adjusted equity earnings from their beer investment

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