Is Altria Group, Inc. (NYSE:MO) Currently Priced 41% Below Its Value?
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 31 2025
0mins
Should l Buy MO?
Source: Yahoo Finance
Altria Group Valuation Analysis
- Fair Value Estimate: Altria Group's fair value is estimated at US$114, indicating a significant undervaluation of 41% compared to its current share price of US$67.21.
- Analyst Price Target: The average analyst price target for Altria is US$62.88, which is 45% lower than the fair value estimate.
Discounted Cash Flow (DCF) Model
- Methodology: The analysis employs a two-stage DCF model, which accounts for an initial high growth phase followed by a steady growth period. Future cash flows are estimated and discounted to present value.
- Projected Cash Flows: Expected levered free cash flows (FCF) from 2026 to 2035 are projected to grow from US$8.97 billion to US$11.5 billion, with growth rates gradually increasing from 1.70% to 2.85%.
- Present Value Calculation: The present value of the 10-year cash flows totals approximately US$69 billion, discounted at a rate of 7.7%.
Terminal Value and Total Equity Value
- Terminal Value Calculation: The terminal value is calculated at US$256 billion, using a conservative growth rate of 3.1% based on the 5-year average of the 10-year government bond yield.
- Total Equity Value: The total equity value, combining the present value of cash flows and terminal value, is estimated at US$191 billion, leading to a per-share valuation that suggests the stock is undervalued.
Financial Strengths and Weaknesses
- Strengths: Altria's earnings and cash flows adequately cover its debt and dividends, placing it in the top 25% of dividend payers in the market.
- Weaknesses: The company has experienced a decline in earnings over the past year, and total liabilities exceed total assets, raising financial distress concerns.
Future Outlook and Risks
- Growth Forecast: Annual earnings are expected to grow over the next three years, although at a slower rate compared to the broader American market.
- Investment Considerations: The analysis emphasizes that valuation is just one aspect of investment decisions, and potential investors should consider risks, future earnings growth, and alternative investment opportunities.
Conclusion
- Valuation Limitations: The DCF model is not foolproof and should be used to test assumptions rather than provide definitive valuations. Changes in growth rates or cost of equity can significantly alter outcomes.
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Analyst Views on MO
Wall Street analysts forecast MO stock price to fall
8 Analyst Rating
4 Buy
3 Hold
1 Sell
Moderate Buy
Current: 69.040
Low
57.00
Averages
65.00
High
72.00
Current: 69.040
Low
57.00
Averages
65.00
High
72.00
About MO
Altria Group, Inc. operates a portfolio of tobacco products for United States tobacco consumers aged 21+. Its segments include smokeable products and oral tobacco products. The smokeable products segment consists of combustible cigarettes and machine-made large cigars. The oral tobacco products segment includes moist smokeless tobacco (MST) products and oral nicotine pouches. Its wholly owned subsidiaries include manufacturers of both combustible and smoke-free products. In combustibles, it owns Philip Morris USA Inc. (PM USA), and John Middleton Co. (Middleton), which are cigarette manufacturers. Its smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Company LLC (USSTC), a global MST manufacturer, Helix Innovations LLC (Helix), a manufacturer of oral nicotine pouches, and NJOY, LLC (NJOY), an e-vapor manufacturer with a commercialized product portfolio. The brand portfolios of its operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, on! and NJOY.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Altria Growth Potential: Despite Altria's slow adaptation to changing tobacco consumption habits, its stock continues to rise, with a market cap of $116 billion and a dividend yield of 6%, as concerns about sustainable dividend growth dissipate with rising cigarette prices.
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- Dividend Yield: The forward yield of 6.11% reflects the company's appeal in the current market environment, potentially increasing investor interest in its stock, especially amid rising interest rates.
- Financial Performance: Altria's non-GAAP EPS of $1.30 misses expectations by $0.02, yet its revenue of $5.08 billion exceeds forecasts by $50 million, indicating resilience in sales despite slightly weakened profitability.
- Shareholder Return Plan: The dividend is payable on April 30, with a record date of March 25 and an ex-dividend date also on March 25, ensuring shareholders receive timely returns and further solidifying trust between the company and its investors.
See More
Altria Group Declares Quarterly Dividend
- Quarterly Dividend Announcement: Altria Group's Board of Directors declared a quarterly dividend of $1.06 per share, payable on April 30, 2026, reflecting the company's ongoing cash flow and profitability.
- Shareholder Record Date: The record date for this dividend is set for March 25, 2026, ensuring that eligible shareholders will receive their dividends on time, which enhances investor confidence in the company.
- Ex-Dividend Date Set: The ex-dividend date is also March 25, 2026, meaning that investors purchasing shares before this date will qualify for the dividend, potentially attracting more short-term investors.
- Commitment to Returns: By maintaining regular dividends, Altria Group demonstrates its commitment to shareholder returns, aiming to enhance shareholder value through stable cash distributions and strengthen its competitive position in the market.
See More
Investors Favor High Dividend Stocks Amid Market Uncertainty
- Investment Strategy in Turbulent Markets: During times of market turbulence and uncertainty, many investors gravitate towards high dividend-yielding stocks, which typically possess high free cash flows and reward shareholders with substantial dividends, thereby enhancing investor confidence and market stability.
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- Analyst Accuracy Assessment: Among numerous analysts, the most accurate ones have consistently rated the aforementioned stocks, indicating that these stocks are viewed as relatively safe investment choices in the current economic environment, potentially attracting more investors seeking stable returns.
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See More
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- Declining Revenue Trend: Altria's total net revenue fell by 3% in 2025 to $23.3 billion, indicating a weakening reliance on the traditional cigarette market, although the company continues to maintain high margins and strong cash flow.
- Transformation Strategy: The company is implementing its 'Moving Beyond Smoking' strategy, aiming to become a smoke-free product supplier by 2030, despite facing significant setbacks in electronic cigarettes and oral tobacco products due to a patent infringement lawsuit, highlighting the challenges of this transition.
- Dividend Appeal: Altria is dubbed a 'Dividend King' with a 56-year streak of dividend increases, recently raising its quarterly dividend to $4.24 per share, yielding 6.3%, which provides an attractive option for income-seeking investors.
- Market Uncertainty: While Altria faces challenges in its transformation process, it continues to attract investors through strong dividend returns; however, the future market environment and the progress of its transition remain uncertain.
See More
Altria's Transition Path Amidst Industry Challenges
- Revenue Decline: Altria's total net revenue fell by 3% in 2025 to under $23.3 billion, indicating a weakening reliance on the traditional cigarette market, although it maintains a high gross margin of 75.83%.
- Dividend King Status: In mid-2025, Altria raised its quarterly dividend by 4% to $4.24 per share, yielding 6.3%, which keeps it competitive in the high-yield sector and attracts income-focused investors.
- Transition Challenges: While Altria aims to become a smoke-free product provider by 2030, its recent patent infringement loss highlights uncertainties in its transition, with smokeable products still accounting for 88% of net revenue.
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