UPDATE: Morgan Stanley Downgrades Altria (MO) to Equalweight

Morgan Stanley analyst Pamela Kaufman downgraded Altria (NYSE: MO) from Overweight to Equalweight with a price target of $47.00.

The analyst comments "MO shares were down 6.1% yesterday (vs. S&P 500 +1.0%) following weaker than expected Q3 results. See Q3 EPS Miss on Softer Cigarette Shipments. Despite the move, we are downgrading MO shares to EW. We see several growing headwinds in 2022 that, when coupled with a lack of near-term catalysts, limit the scope for meaningful share price appreciation. We expect cigarette industry volumes to decline at a normalized, MSD rate in 2022 and smokers to face greater macro pressures from rising gas prices/inflation. MO's premium cigarette portfolio is vulnerable to down-trading given recent widening price gaps vs. discount brands. We think MO's decision to maintain its ABI stake removes a potential near-term positive catalyst. With an increasing investor focus on ESG, prospects for a proposed menthol rule next year, and the possibility — albeit low — of a tobacco FET increase, we see limited near-term catalysts to drive the shares higher. MO should grow EPS at a ~5.6% CAGR over the next three years, which we think is reflected in valuation at 7.8x NTM EV/EBITDA on the core business. Our updated PT $47 (vs. $52 previously) represents 8.1x core 2022E EV/EBITDA, slightly below MO’s 3-year average multiple of 8.3x."

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 $44.58 yesterday.

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