Altria (MO) Target Price Lifted to $58 at Nomura Securities

Nomura Securities analyst David Hayes reiterated a Buy rating and boosted his price target on Altria (NYSE: MO) to $58.00 (from $56.00)

Hayes commented, "We now view Mark Ten profit development much better. In FY15, the better e-vapour profit should be largely offset by heightened pension costs and greater investment in traditional tobacco, leaving our EPS little changed at $2.80 (con $2.80; guidance $2.75-2.80). Beyond the current year, the accelerated Mark Ten profit development and better pricing in cigarettes (Altria has pulled back on promotion) supports an increase in our TP of 3.5%. Although we believe we are beginning to see the current business model become increasingly pressured, we expect additional value creation as a result of the proposed US deal of around $5 per share. Against the backdrop of the ending of the tobacco buyout quota and better profit development in e-vapour, based on company guidance for FY15 it appears that much of the quota benefit will be spent back at the top line. This is consistent with what we expect at peers. Also weighing at Altria in the current year will be increased pension costs (c$70m)."

FY15E EPS goes from $2.79 to $2.80; FY16E EPS from $2.92 to $3.02.

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 $55.61 yesterday.

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