Altria Group Inc.'s Buy Recommendation Affirmed

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Altria Group (NYSE: MO) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The gross profit margin for ALTRIA GROUP INC is rather high; currently it is at 55.79%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MO's net profit margin of 11.08% significantly trails the industry average.
  • ALTRIA GROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALTRIA GROUP INC increased its bottom line by earning $2.26 versus $2.06 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $2.26).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness 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.
  • In its most recent trading session, MO has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

Altria Group, Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. Altria Group has a market cap of $71.1 billion and is part of the consumer goods sector and tobacco industry. Shares are down 7.3% year to date as of the close of trading on Friday.

You can view the full Altria Group Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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