UBS Downgrades Altria Group to Sell, Warning of Weak Sales

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Altria Group ($NYSE:MO) is a large publicly-traded tobacco company with a portfolio that includes some of the best-known cigarette brands in the United States. The company has been under pressure in recent years as health concerns have led to declining smoking rates, and UBS has now downgraded the stock to a Sell rating. UBS analyst Andrei Condrea and team said they believe the tobacco sector will continue to weaken, and this is not fully reflected in the consensus estimate on Altria. They see pressure on Altria’s cigarettes due to downtrading by consumers away from premium products, and pressure on its smokeless products from nicotine pouches.

Altria is also noted to be lacking any material next-gen product offering. While Altria has been working to diversify its business away from cigarettes, it remains heavily reliant on them for profits. UBS believes the company will continue to face headwinds in the form of declining smoking rates, and sees little upside potential in the stock at this time.

Market Price

On Thursday, UBS downgraded Altria Group stock to “sell” from “neutral,” warning of weak sales for the company. Altria Group opened at $45.0 and closed at $44.2, down by 2.2% from prior closing price of 45.2. UBS analyst Nik Modi said in a note to clients that Altria Group’s sales are likely to remain weak in the near term, due to continued declines in smoking rates and increased competition from e-cigarettes and other alternatives.

VI Analysis

Investors often look at a company’s fundamentals in order to gauge its long term potential. The VI app makes this process simple by providing users with a comprehensive overview of a company’s financial and business health. According to the VI Risk Rating, ALTRIA GROUP is a medium risk investment. This is based on factors such as the company’s financial stability and business model. The app has also detected 2 risk warnings in the company’s income sheet and balance sheet.

However, overall, the company appears to be a relatively safe investment.

VI Peers

The tobacco industry is fiercely competitive, with Altria Group Inc up against Swedish Match AB, Imperial Brands PLC, British American Tobacco PLC, and other companies. All are vying for a share of the global tobacco market, which is estimated to be worth $837 billion.

– Swedish Match AB ($LTS:0GO4)

Founded in 1862, Swedish Match is a leading manufacturer of tobacco products with a portfolio of well-known brands, including Red Man, Timber Wolf, and White Owl. The company also produces a wide range of smokeless tobacco products, including snus and moist snuff, as well as cigars and matches. Swedish Match is headquartered in Stockholm, Sweden, and has operations in more than 90 countries.

Swedish Match has a market capitalization of 167.51 billion as of 2022 and a return on equity of -107.57%. The company’s products are sold in more than 90 countries around the world.

– Imperial Brands PLC ($LSE:IMB)

Imperial Brands PLC is a tobacco company with a market cap of 19.07B as of 2022. The company has a Return on Equity of 50.52%. Imperial Brands PLC is a leading international tobacco company, with products sold in over 160 countries. The company’s portfolio includes well-known brands such as Gauloises, West, and Rizla. Imperial Brands PLC is committed to providing shareholders with long-term value through a combination of growth and dividend income.

– British American Tobacco PLC ($LSE:BATS)

British American Tobacco PLC is a large multinational tobacco company with operations in over 50 countries. The company has a market capitalization of over $73 billion as of 2022 and a return on equity of 8.35%. British American Tobacco is one of the world’s largest producers of cigarettes and other tobacco products. The company’s brands include Dunhill, Lucky Strike, and Pall Mall. British American Tobacco also has a strong presence in the e-cigarette and vaping market with its Vype and glo brands.

Summary

The Altria Group, Inc. is an American multinational cigarette and tobacco manufacturing company headquartered in Richmond, Virginia. It is the parent company of Philip Morris USA, John Middleton, Inc., U.S. Smokeless Tobacco Company, Inc., Ste. Michelle Wine Estates, and Philip Morris Capital Corporation. Altria’s share price has been under pressure in recent years amid concerns about declining smoking rates in the United States.

In response, Altria has been working to diversify its business beyond cigarettes. Investors considering an investment in Altria should be aware of the potential risks associated with the company’s dependence on the tobacco industry. While Altria’s diversification efforts may help to mitigate some of these risks, they may not be enough to offset the potential decline in smoking rates.