Altria (MO) PT Lifted to $65 at Nomura; Confident in Double-Digit EPS Growth

Nomura Securities analyst Owen Bennett reiterated a Buy rating and bumped his price target on Altria (NYSE: MO) to $65.00 (from $64.00) saying they are confident about double-digit earnings growth in FY15 and FY16.

Bennett highlighted:

• We raise our FY15E group EBIT: Reflecting continued share momentum across smokeable and smokeless as well as better-than-expected cigarette industry volumes and stabilising smokeless industry trends, we now expect FY15 group EBIT growth of 11.0% (vs 10.2% previously), with sales growth of 4.6% (vs 4.1%) and margin development of 270bp (vs 260bp).
• Lower SAB contribution sees FY15E EPS cut slightly: Despite the better-than-expected operational outlook, we cut out EPS slightly to USD 2.81 (from USD 2.83) to reflect a lower contribution from SAB forex driven) and a higher effective tax rate. Our estimate is still at the top end of company guidance (USD 2.76-2.81) and represents FY15E earnings growth of 9.7%.
• Expect another year of double-digit earnings growth in FY16: Given the strong fundamentals, a more supportive interest rate on debt (following current year refinancing) and an improving SAB, we expect FY16 EPS growth of 10.2%. Potential earnings accretion from an ABI/SAB deal (we calculate c6% year one) could see growth even greater. We raise our target price by c1.5% to reflect the improved operational outlook and time since we last wrote.

For an analyst ratings summary and ratings history on Altria click here. For more ratings news on Altria click here.

Shares of Altria closed at $60.47 yesterday.

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