Altria (MO) Stock Climbs on SABMiller, AB InBev Deal

Altria (MO) stock is higher in afternoon trading on Wednesday, as it expects from the 'MegaBrew Deal' a 10.5% stake, $2.5 billion in cash and two board seats.
By Rachel Graf ,

NEW YORK (TheStreet) -- Altria Group (MO) - Get Report  stock is up 1.41% to $57.60 in afternoon trading on Wednesday, after AB InBev (BUD) issued a formal offer to acquireSABMiller (SBMRY) today.

Under the terms of the deal, Altria, which has a 27% stake in SABMiller, expects to receive a 10.5% stake in the combined company, $2.5 billion in cash and two seats on the new company's board of directors. 

The merger also will enable the cigarette giant to continue to use equity accounting practices that have contributed to its record profits from its beer assets on its income statements, according to the Wall Street Journal.

"Altria fully supports this transaction, and we strongly believe that the deal is in the best interest of our shareholders," CEO Marty Barrington said in a statement. "Upon closing, Altria will continue to participate in the global brewing profit pool as a large and significant shareholder in what will be the industry's largest company."

Separately, TheStreet Ratings team rates ALTRIA GROUP INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

We rate ALTRIA GROUP INC (MO) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, growth in earnings per share, increase in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 14.5%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ALTRIA GROUP INC has improved earnings per share by 9.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALTRIA GROUP INC increased its bottom line by earning $2.57 versus $2.26 in the prior year. This year, the market expects an improvement in earnings ($2.81 versus $2.57).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Tobacco industry average. The net income increased by 9.4% when compared to the same quarter one year prior, going from $1,397.00 million to $1,528.00 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Tobacco industry and the overall market, ALTRIA GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $2,843.00 million or 23.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.04%.
  • You can view the full analysis from the report here: MO

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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